Interim Budget 2024-25 Preview - 5.2% Or 5.4% Of GDP For FY25BE? Motilal Oswal's Analysis

Motilal Oswal Report

The Government of India will present the Interim Budget 2024-25 on February 01, 2024 (Thursday). Although the Budget presentation is only one part of managing public finances, it attracts significant attention. In this note, we discuss our expectations from the Interim Budget and present our fiscal math for FY24 and FY25.

Based on provisional data available for M8 FY23 (April-November 2023), our calculations suggest that gross taxes can exceed budget estimates for the third consecutive year, by as much as Rs 1.3 trillion in FY24.

Due to higher non-tax revenue receipts, such as dividends, coupled with higher devolution to states and an expected shortfall in divestments, there is a projected over-achievement of Rs 1.1 trillion in total receipts in FY24.

According to the first supplementary demands presented on December 06 2023, the GoI has sought to authorize an additional cash outgo of Rs 584 billion in FY24, largely because of higher subsidies and defense services.

Nevertheless, it is likely that total spending will exceed FY24BE by Rs 700-800 billion, led by higher NREGA spending.

If so, the fiscal deficit will be Rs 17.6 trillion in FY24, lower than the target of Rs 17.9 trillion, but at 5.9% of gross domestic product , as per the budget estimates (due to lower nominal GDP growth of 8.9% versus BE of 10.5%).

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