The strategy behind the budget is embedded in its fine details
₹17,000 crore against the budgeted ₹19,000 crore, the next year will see it further slashed to ₹12,000 crore. The big inclusion in the interim budget for 2024-25 is ₹205,250 crore for free foodgrains. The pre-poll strategy of displaying fiscal restraint while continuing with handouts was made inevitable by the repeated economic shocks to the rural economy: demonetization, the covid pandemic and an inflationary surge over the past 18 months, all of which have resulted in suppressed rural incomes and demand.
Even though consumer price inflation has abated somewhat, settling within the acceptable 2-6% band but higher than the 4% target, this unsteady equilibrium is still susceptible to external shocks. Ongoing geopolitical turbulence could once again adversely affect the price line. This apprehension of incipient inflationary trends forced the monetary policy committee (MPC) at Reserve Bank of India (RBI) to leave its policy rates untouched during its first policy meeting for fiscal year 2024-25.
RBI governor Shaktikanta Das said in a statement: “The uncertainties in food prices, however, continue to impinge on the headline inflation trajectory. Taking into account this growth-inflation dynamics and the fact that transmission of the cumulative 250 basis points policy rate hike is still underway, the MPC decided to keep the policy repo rate unchanged at 6.50%." The central bank is currently focused on reducing systemic liquidity to keep inflationary pressures under check. The combination of a tight monetary policy, likely inflationary threat, continuing rural stress and impending general elections therefore seems to have informed the interim budget strategy.
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