RBI Paper Praises Union Budget For Balancing Fiscal Discipline And Strengthening Growth Outlook
It also emphasised that the budget aims to support growth and job creation while pursuing fiscal consolidation.
The Union Budget strikes the "right balance" between fiscal prudence and macroeconomic stability while enhancing the medium-term growth outlook, said a paper by Reserve Bank of India staffers.
The budget, presented by Finance Minister Nirmala Sitharaman on July 23, aims to bolster macroeconomic stability and tap into various economic sectors' potential, according to the paper authored by Aayushi Khandelwal, Harshita Yadav, and others in the RBI’s monthly bulletin.
The paper, which does not represent the institutional views, said, "Overall, the Union Budget 2024–25 achieves a balanced approach between fiscal responsibility and macroeconomic stability, which is expected to strengthen the medium-term growth outlook." It also emphasised that the budget aims to support growth and job creation while pursuing fiscal consolidation.
The paper notes the reduction of the fiscal deficit to 4.9% and highlights the government's commitment to fiscal consolidation. It indicates that starting in 2026–27, the government plans to ensure that Union government debt as a percentage of GDP continues to decline.
There is a'special emphasis' on skill development that will improve employability and job opportunities for the youth, the paper said.
It also continues the thrust towards capital expenditure with increased allocations and sustained support for states' capital expenditure.
It has proposed a simplification of direct and indirect tax regimes, the paper said, noting the increase in securities transaction tax on futures and options to 'check the heightened activity' in the segment.
The paper said the Union Budget, the first for the new government, has chalked out an agenda for next-generation economic reforms that are intended to improve the overall productivity and efficiency in the factor markets.
These measures augur well for medium-term growth prospects, the paper added.
It was also noted that the higher receipts from the RBI's dividend and the same from nationalised banks and financial institutions have helped in the budgeted 15% growth in non-debt receipts.
On the expenditure front, it said railways, road transport and highways account for almost half of the budgeted capital expenditure.
The total capex of the Union government and central public sector enterprises increased from an average of 4% of the gross domestic product in the pre-Covid period to 4.2% of the GDP in the post-Covid period, it said.
It also seemed to welcome the increase in spending for women-centric schemes, pointing out that there is an 18.9% growth in the gender budget allocations for the financial year 2025, of which over half have been allocated towards schemes with 100% allocation for women.
The proposal to develop a taxonomy for climate financing to augment the capital available for projects pertaining to climate adaptation and mitigation will help support India's climate and green commitments, the paper said.
(With Inputs From PTI)
