Union Budget 2024: Revenue expenditure raised, capex remains untouched

Allocations for Andhra Pradesh and Bihar, but financial implication unclear

Using the excess dividend from the Reserve Bank of India (RBI), the full FY25 Budget increased revenue expenditure by Rs 54,744 crore to Rs 37.09 trillion from the Interim Budget, while keeping the capital expenditure estimate unchanged at Rs 11.1 trillion.

“Increased degree of freedom amid RBI’s excess dividend bonanza of 0.4 per cent of GDP has been partly used to correct the fiscal path faster, while revenue expenditure allocations have increased by 0.2 per cent of GDP, in improving labour and skill development and health (which will improve human capital later), along with higher transfers to states (led by Bihar and Andhra Pradesh),” Madhavi Arora, lead economist at Emkay Global Financial Services, said.

 

Arora said the expected Centre's capex growth at around 17 per cent in FY25 will imply that the rest of FY25 may see 30-35 per cent growth, after contracting 14 per cent in April-May. “We will watch for constraints in the absorptive capacity of the system as general government capex aims to pick up further,” she added.

Industry bodies had asked for capex to be raised by 25 per cent over the revised estimates of FY24. Over the provisional estimate of FY24, capex has been budgeted to increase 16.9 per cent in FY25. Finance Minister Nirmala Sitharaman said capex in FY25 is now 3.4 per cent of GDP.

Schemes like interlinking of rivers (Rs 4,000 crore) and Pradhan Mantri Awas Yojana (Rs 8,4671 crore) saw an increase in allocation, whereas Pradhan Mantri Krishi Sinchayee Yojana (Rs 9,339 crore) witnessed a dip compared to the Interim Budget FY25.

For labour, employment and skill development, the FY25 Budget allocated Rs 2,2472 crore, which is Rs 9,367 crore more than the FY24 revised estimates, with the New Employment Generation Scheme being introduced.

Of the total government expenditure of Rs 100, while the Interim Budget had allocated the states’ share of taxes and duties at Rs 20 and Finance Commission and other transfers at Rs 8, the full FY25 Budget increased these numbers to Rs 21 and Rs 9, respectively. In contrast, the share of interest payments has decreased from Rs 20 to Rs 19.

The FY25 Budget has, for the first time, provided the Provisional Actuals (PA) for FY24 “wherever feasible”, incorporating the latest data provided by the Controller General of Accounts. “The provisional actuals in this document are unaudited and are subject to change,” the Budget documents said.

While the Budget speech mentioned incentives for Andhra Pradesh and Bihar, their actual financial implication in FY25 is not clear. The Budget said the “special financial support” of Rs 15,000 crore for Andhra Pradesh for development of its capital would be facilitated through multilateral development agencies, thus ring-fencing it from any adverse financial impact.

Similarly, the Budget said it would support the development of road connectivity projects, namely Patna-Purnia Expressway, Buxar-Bhagalpur Expressway, Bodhgaya, Rajgir, Vaishali and Darbhanga spurs, and an additional two-lane bridge over the Ganga at Buxar at a total cost of Rs 26,000 crore. 

Power projects, including setting up of a new 2,400 MW power plant at Pirpainti (Bihar), have also been announced at a cost of Rs 21,400 crore. “New airports, medical colleges and sports infrastructure in Bihar will be constructed,” Sitharaman announced.