Interim Budget 2024: Navigating the crossroads

livemint.com:

As finance minister Nirmala Sitharaman gears up to present the vote-on-account budget for fiscal year 2024-25 (FY25) on 1 February, India's economy finds itself at a crucial juncture. The mix of current macroeconomic indicators presents both opportunities and challenges for the finance minister. On the bright side, growth projections are promising.

The National Statistical Office's (NSO) advance GDP estimates and the Reserve Bank of India's (RBI) forecasts suggest a robust real growth rate of 7-7.3% in FY24. This optimistic outlook provides Sitharaman with greater flexibility in crafting the budget's revenue and expenditure figures. However, balancing this with expectations of a populist budget in an election year will be a delicate task.

With the government seeking a third term, increased welfare spending, particularly on programmes for women, the poor, farmers, youth, and tribals, is anticipated. The twin deficit numbers also offer reassurance. Goldman Sachs has lowered its forecast for India’s current account deficit (CAD) to 1.3% of GDP, thanks to rising service exports and declining oil prices.

Additionally, increased revenue from both direct and indirect taxes should comfortably meet the projected fiscal deficit of 5.9% of GDP. In the current fiscal year's first eight months, the average monthly receipts from goods and services tax (GST), corporate tax, and personal income tax have significantly exceeded last year's figures. Conversely, recent industrial production and inflation data signal potential economic challenges.