Budget 2024 To Signal Continuity With Shift In Spending Mix: Barclays Report

Barclays anticipates that the upcoming budget, set to be presented by Finance Minister Nirmala Sitharaman on July 23, will underscore policy continuity with a nuanced adjustment in expenditure focus. The government aims to maintain fiscal consolidation while slightly recalibrating its spending priorities, it said.

The budget is expected to maintain a fiscal deficit target of 5.1% of GDP, aligning closely with previous estimates and reflecting accelerated consolidation efforts, according to Barclays analysis.

This fiscal discipline will be supported by increased receipts from Reserve Bank of India dividends and higher tax revenues, which are likely to fund expanded expenditure rather than narrowing the deficit further.

The forecasted total expenditure for FY25 is projected to grow by 11.1% year-on-year, reaching Rs 49.35 trillion. This increase marks an emphasis on revenue spending, albeit with a moderated pace of capital expenditure growth compared to previous years. "We expect the budget to continue to slow the pace of capital expenditure, but allow for capex growth of 17.3% over FY23–24 outlays," it said.

While the government will prioritise capital expenditure, maintaining it at the highest share since FY05, there will also be a notable uptick in welfare spending, according to Barclays. This balance is seen as crucial in addressing both economic imperatives and political mandates, particularly in light of recent electoral outcomes. "This means the government's policy of increasing capital expenditure will be maintained while helping it to increase welfare spending too," the report said.