Budget 2024: Fiscal Consolidation In Focus With Prioritised Capex, Say Analysts

While comfortably achieving the fiscal deficit target for the current year, the upcoming budget is likely to signal further fiscal consolidation with improved and prioritised capital expenditure, according to analysts.

Robust tax collection in FY24 has given the government some fiscal space to carry out additional spending and yet meet the fiscal deficit target of 5.9% of GDP, Goldman Sachs said in a report.

"We expect the focus on capex to continue but at a slower pace than what has been seen in the last few years, given the medium-term fiscal consolidation path of the central government," Goldman Sachs said.

The fiscal position for India appears well-managed from a flow perspective, but there is a need for debt reduction, Barclays said in its report.

It expects the interim budget to signal further fiscal consolidation and provide long-term goals for deficit management to reduce the public debt burden and create more fiscal space.

Developing the country's infrastructure is likely to continue to be a focus, according to Axis Securities Ltd. "The private capex is expected to receive a much-needed push. Higher rural spending is likely in FY25, with more focus on affordable housing."

For the next fiscal, the push will remain towards supporting growth via higher capital expenditure, according to Barclays. But given the indicated fiscal consolidation path, capital expenditure growth will likely be normalised as compared with the past few years, it said.

Nominal GDP growth in FY25 will be higher than seen in the current fiscal, the brokerage said.

Barclays expects nominal GDP growth of 11.3%—higher than the current fiscal. But real GDP growth may slow marginally to 6.5% from 6.7% in FY23, it said.

Finance Minister Nirmala Sitharaman will present the interim budget on Feb. 1.

While comfortably achieving the fiscal deficit target for the current year, the upcoming budget is likely to signal further fiscal consolidation with improved and prioritised capital expenditure, according to analysts.

Robust tax collection in FY24 has given the government some fiscal space to carry out additional spending and yet meet the fiscal deficit target of 5.9% of GDP, Goldman Sachs said in a report.

"We expect the focus on capex to continue but at a slower pace than what has been seen in the last few years, given the medium-term fiscal consolidation path of the central government," Goldman Sachs said.

The fiscal position for India appears well-managed from a flow perspective, but there is a need for debt reduction, Barclays said in its report.

It expects the interim budget to signal further fiscal consolidation and provide long-term goals for deficit management to reduce the public debt burden and create more fiscal space.