Budget 2024: Fiscal Math Realistic, Supports Economic Growth | In Charts

Key macro figures in the Union budget 2024-25 indicate continuing fiscal consolidation even as the government focused on creating employment, reskilling of labour and enabling financing for the micro, small and medium enterprises.

The Union government will target a fiscal deficit of 4.9% of the gross domestic product for the current financial year, as compared to a target of 5.1% set in the interim budget, Finance Minister Nirmala Sitharaman announced in her budget speech on Tuesday. For the last fiscal too, the fiscal deficit has been revised to 5.6% of the GDP.

The anticipated reiteration of the reduction in the fiscal deficit to below 4.5% of the GDP in fiscal 2026 is welcome, according to Aditi Nayar, chief economist at ICRA Ltd.

Even though a fiscal consolidation of 0.7% of GDP should impart a negative fiscal impulse, when adjusted for better quality of spend (more capex), and much of the higher RBI dividend coming in as a transfer from abroad (rather than on the back of domestic financial repression), the fiscal impulse is marginally positive, said Pranjul Bhandari, chief economist at HSBC.

"And this is precisely the winning stroke of this budget: lowering the fiscal deficit, without imparting a negative impulse on growth."

The budget is credit positive as it is expected to keep fiscal deficit at around 4.9% of GDP, lower than the 5.1% of GDP announced in the interim budget, said Gene Fang, associate managing director, Moody’s Ratings. "This places the government's goal of achieving a 4.5% of GDP deficit by fiscal 2025-26 within reach."

Taking into consideration the latest budget estimates, general government debt is projected to stabilise above 80% of GDP over the next three years, down from 89.3% in fiscal 2021, according to Moody's, with general government interest payments estimated to fall to around 24% of general government revenue over the next two years, from over 28% in fiscal 2021. Still, this remains much higher than the median 8.7%, recorded by Baa-rated peers, the ratings agency said.

Gross borrowings are pegged at Rs 14.01 lakh crore, as compared to Rs 14.1 lakh crore in the interim budget. The modest reduction will give a significant boost to the bond markets, according to Suman Chowdhury, head of research at Acuite Ratings and Research Ltd.

A step-up in job creation will be positive for private consumption over the medium term, Chowdhury said.

The change in income tax slabs and the direct benefit transfer to first-time workers is likely to spur consumption, particularly for small-ticket items, by increasing disposable incomes, according to Abheek Barua, chief economist at HDFC Bank. "The budget's policy mix—including continued capex, job creation, support for manufacturing, agriculture and rural development—is likely to be positive for India's potential growth."

The government's capital expenditure for the fiscal ending March 31, 2025, has been retained at Rs 11.1 lakh crore, Sitharaman said. That is 3.4% of the GDP. In FY24, the revised target was Rs 9.4 lakh crore or 3.3% of the GDP.

Revenue receipts are estimated to rise 15% to Rs 31.3 lakh crore, net tax revenue to the Centre is pegged to rise 11% to Rs 25.8 lakh crore.

“The budget responsibly deploys the higher revenues (tax and non-tax revenues) on reducing the fiscal deficit, sustaining spending on investments and making way for higher spending to support segments of the economy that require support, Dipti Deshpande, principal economist at CRISIL said. Overall, the quality of spending remains intact despite the slight tilt towards revenue spending, she added.

Higher gross GST and direct tax collections are expected to drive revenue growth in the ongoing fiscal, Moody's said.

Amid a rise of 8.5% in total expenditure to Rs 44.4 lakh crore, revenue expenditure saw a modest rise of 2.2% to Rs 37.1 lakh crore.