Analysts expect Sitharaman to maintain the BJP government’s emphasis on infrastructure spending on February 1 (Interim Budget 2024), aiming to reduce the fiscal deficit from the targeted 5.9 percent of GDP for the current financial year.
According to ET, analysts suggest that the Modi government’s optimistic outlook for re-election in April-May 2024 has enabled it to avoid populist measures. Instead, the government is concentrating on infrastructure projects such as roads and power plants.The government expects a 7.3 percent growth in the Indian economy for the current financial year, according to the recently released First Advance Estimates. Analysts note that achieving a growth rate exceeding 7 percent for the third consecutive year, especially in the current global environment, would likely contribute to Modi securing another mandate.
In FY24, government spending is estimated to have increased by approximately 4 percent annually, contrasting with a minimal 0.1 percent rise in the previous fiscal year. Concurrently, private investment is projected to grow by 10.3 percent, slightly below the 11.4 percent increase observed in the previous year, as indicated by the data.
Earlier this week, ETNow reported that the government might reduce the budget deficit target for FY25 to 5.2 percent of the GDP.
The fiscal deficit is the difference between the government’s expenditure and revenue, serving as a crucial indicator of a country’s economic stability and health.
Nevertheless, certain analysts have highlighted a concern regarding the heightened government expenditure on capital expenditure (capex), posing a risk to the nation’s fiscal deficit and debt. This, in turn, is expected to keep interest rates high. Sitharaman allocated a record Rs 10 lakh crore for capital expenditure in the FY24 Budget.
As of the end of November, the government’s fiscal deficit reached Rs 9.06 lakh crore, equivalent to 50.7 percent of the full-year budget estimate. In the corresponding period of the previous year, the deficit was higher at 58.9 percent of the budget estimates for FY23. In absolute terms, the fiscal deficit amounted to Rs 9,06,584 crore for the April-October period of 2023-24.