interim budget on February 1. This means less likelihood of any major announcement or showering of freebies on the poor. The government is also likely to slow the pace of capital expenditure to rein in fiscal deficit.
The fiscal deficit target of 5.3% will be set by the government in FY25, keeping in view the fiscal consolidation path till FY26, as it normalises capital spending and refrains from any major announcements in the interim budget before the general elections, Icra and Barclays economists have said. ICRA expects the fiscal deficit target for FY25 to be set at 5.3% of GDP, midway through the expected print of 6.0% for FY2024 and the medium-term target of sub-4.5% by FY26. India has set a target of a 5.9% fiscal deficit for FY24.
The interim budget is expected to follow the tradition and just seek a vote on account, Parliament’s nod for a grant in advance to meet the Centre’s essential expenditure for the first four months of FY2024-25.
But the government may not totally ignore pressing issues that demand action especially just months before elctions. One such issue of economic as well as electoral importance is sluggish rural demand as the poor in India's rural areas are hit more by rising prices. The government may not wait till the full budget to address the issue and might declare welfare schemes for the rural poor in the interim budget.
Villages in distress
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