Budget 2024: Govt may lower fiscal deficit in election year, focus still on capex
Budget 2024 Expectations: Here's what CareEdge predicts for India's economy The government is aiming to narrow the fiscal deficit to 4.50% of GDP by the end of the 2025-26 fiscal year (FY) from 5.90% in the current year to end-March 2024. The January 10-19 Reuters poll of 41 economists showed the Feb.
1 budget is expected to target a narrowing of the fiscal deficit as a percentage of GDP to 5.30% in 2024-25. Budget 2024 expectation: Fiscal consolidation to continue in FY25 says BofA "To achieve the (2025-26) 4.5% deficit target, total expenditures would need to rise by no more than 7% per FY on average...meaning an even more aggressive cut to expenditures is likely in the coming years," said Alexandra Hermann, lead economist at Oxford Economics.
Can fiscal consolidation reassure investors and boost market sentiment? Capital spending has already surged more than 33% this fiscal year to over 10 trillion rupees ($120 billion) and is projected to rise 15% in the next, reaching 11.50 trillion rupees, with expectations of an increase in private investment. Government investment has recently been driving the country's economic expansion.
"Continued and rapid improvement in India's infrastructure will be paramount to reviving the private investment cycle," Hermann said. Budget 2024 expectations: 6 major themes that could dominate the Interim Budget "But to leverage India's huge potential and ensure sustainable and inclusive growth over the medium to longer term, human capital levels will need to improve, which is why spending on education should be the main priority." However, no economist who answered an additional question cited education and healthcare as the two main budget priorities.
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