 "budget 2023")
In the 2024 Interim Budget presentation on February 1, Union Finance Minister Nirmala Sitharaman outlined the Revised Estimates for 2023-24 and the Budget Estimates for 2024-25. Economists and analysts have concurred that the Centre's fiscal projections in the Interim Budget show their seriousness about fiscal consolidation. They claim that both the revised estimates (RE) and Budget estimate (BE) look achievable, however, they have pointed out that they will have to wait for the full Budget after the 2024 general election to see what the new government has to say.
A cautious approach to non-tax revenue projections
Aditi Nayar, chief economist at ICRA said that they were positively surprised by the lower fiscal deficit targets for FY24 RE and FY25 BE. Nayar stated that the higher-than-expected capex indicates a commitment to economic momentum, though caution is advised regarding realistic non-tax revenue projections.
"With the elections coming up, the full Budget will be presented presumably on July 1. And after that, typically during the monsoon months, Capex tends to be quite tardy. So looks like we will end up with a quiet back end capex growth in FY25," Nayar stated.
A non-populist Budget focused on sustainable development
Amar Ambani, executive director at YES Securities called it "a non-populist Budget with a clear emphasis on sustainable development".
"Clearly, the biggest plus for the market was the aggressive fiscal deficit target of 5.1 per cent for FY25 versus expectation of 5.5 per cent. Our own view was closer to the government stance, that it will target an aggressive number for FY25. The commitment to achieve a 4.6 per cent fiscal deficit in FY26 seemed imperative, given the inclusion of Indian bonds in global indices," Ambani explained.
Akhilesh Ranjan, former member of CBDT, commended the government statement, which reflected a confident nation moving towards development status by 2047.
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Ranjan said, "The substantial increase in personal income tax collections (the RE for FY24 being about 13 per cent higher than the BE, and the BE for FY25 pitched at an even higher increase of about 28 per cent over that of FY24) is notable and indicates a robust and increasingly compliance-based tax system, generating a direct tax to GDP ratio of well over six per cent."
A commitment to macro-stability with GDP
On governance, development and performance (GDP), economists believe that the Interim Budget showcases India's commitment to macro stability amid global fiscal challenges.
Anitha Rangan, economist at Equirus said, "With a new definition to GDP, with a sharp focus on fiscal consolidation, the interim Budget has demonstrated that the direction of the government is on long term growth... In the era where the global world is struggling to rein in fiscal deficit and borrowing, India adopting the path of consolidation and reduction in borrowing showcases its macro stability."
Sanjay Tolia, partner at Price Waterhouse & Co LLP reiterated that the Budget speech portrayed a direction toward nation-building, with a focus on reaching a $7 trillion economy by 2030.
"Through GDP we stand today as the fifth largest nation in economic size, growing at a steady pace of seven per cent. This coupled with the fine balancing of the fiscal deficit at 5.8 per cent, targeted at less than 4.5 per cent by FY26, keeps India on the right track."
Conservative revenue estimates
Analysts have commended the government for maintaining realistic if conservative, revenue estimates.
Achala Jethmalani, economist at RBL Bank explained, "The fiscal consolidation is premised on an improved revenue-capital expenditure mix of the government along with fairly conservative tax and Nominal GDP assumptions. FY25 fiscal figures make the Budget fiscally prudent, but not fiscally austere in nature. The fiscal consolidation and the commitment to reach the fiscal deficit-to-GDP levels of 4.5 per cent by FY26 augur well for the economy and the rates market, in particular."
Dhawal Dalal, president & cio – fixed income at Edelweiss Asset Management Limited, added, "A very pragmatic & growth-oriented interim budget with a continued focus on conservative revenue estimation and fiscal consolidation. The FM believes in under-promise and over-delivering on the fiscal front. Lower borrowing in FY25 is expected to decline bond yields. This will be positive for the economy and will support in reaching our goal of a $5 trillion economy by the end of 2027, in our view."
Economist reactions suggest optimism but caution, emphasising the need for realistic revenue projections and monitoring the trajectory of key economic indicators. The full Budget presentation is expected to take place in July after the Lok Sabha elections 2024 conclude and a new government is formed. The Economic Survey will also be released around that time.
Full coverage and insights on the Budget 2024 can be found here.
