Revenue upside should be split between spending, consolidation

livemint.com:

₹34.4 trillion for FY2024 by ₹276 billion, as per the provisional data released by the Controller General of Accounts (CGA). This overshooting implies that the growth in the FY2025 Interim Budget Estimates (IBE) is quite modest at 10.6%, mildly trailing our projection of nominal GDP of 10.8% for the fiscal.

Hence, we believe that there is scope to target higher tax revenues in FY2025 relative to that estimated in the Interim Budget. We conservatively estimate net tax revenues to exceed the IBE by ~ ₹200 billion.A much larger tailwind stems from the RBI’s unexpectedly large dividend payout of ₹2.1 trillion to the GoI, as against the IBE of ₹1.0 trillion pegged for dividends from the RBI, nationalised banks and financial institutions put together.

This implies an upside of at least ₹1.0 trillion, and would lead to a sharp upward revision in the estimates for non-tax revenues in the final budget vis-à-vis the IBE.Together, these additional tax and non-tax receipts would provide a leeway of ~ ₹1.2 trillion to the GoI for enhancing its expenditures or a sharper fiscal consolidation than what was pencilled in in the Interim Budget for FY2025 or both. The mix between the two would be eagerly watched.We believe that if the GoI enhances its capital expenditure target of ₹11.1 trillion for FY2025, it may be difficult to achieve on two counts.

First, the GoI’s capex growth is likely to have been muted in Q1 FY2025, with project execution slowing amid the general elections and the Model Code of Conduct, notwithstanding the robust expansion that was witnessed in the first month of the quarter. Further, the capex numbers are typically low in the monsoon months, thereby suggesting that the required monthly run-rate in the second half