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HomeNewsCentre to lower fiscal deficit despite capex boost in Budget 2024: Survey

Centre to lower fiscal deficit despite capex boost in Budget 2024: Survey

Jan 20, 2024 02:34 PM IST

Union Budget 2024 expected to strike balance between populism and fiscal prudence, finds the survey.

The Centre would aim for a lower deficit in the 2024-25 fiscal year despite increasing capital expenditure to a record level in the Union Budget 2024, as per a Reuters poll of economists. The February 1 budget is anticipated to strike a balance between populist measures and fiscal prudence while narrowing the fiscal deficit, according to the survey conducted from January 10-19 with 41 economists.

FILE: People watch the Union Budget being presented by Finance Minister Nirmala Sitharaman in the Parliament. (HT PHOTO)
FILE: People watch the Union Budget being presented by Finance Minister Nirmala Sitharaman in the Parliament. (HT PHOTO)

Reuters poll of economists on Union Budget 2024: 5 estimates

• In the backdrop of an election year, the budget, under Prime Minister Narendra Modi, who is pitching for his third term, is anticipated to navigate a delicate equilibrium between populist schemes and fiscal responsibility.

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• According to the polls, the February 1 budget is projected to focus on narrowing the fiscal deficit to 5.30 per cent of GDP in 2024-25.

• Notably, the poll revealed that none of the economists identified education and healthcare as the primary budgetary concerns.

• Respondents highlighted infrastructure investment (34) as the foremost priority, followed by rural development (17) and job creation (16), given the challenge of accommodating millions entering the workforce annually.

• Additionally, the focus on deficit control is expected to limit the expansion of welfare schemes, and gross borrowing is predicted to remain largely unchanged at 15.60 trillion rupees from the current year’s projection.

Why do economists think fiscal deficit will narrow?

The government is aiming to narrow the fiscal deficit to 4.50 per cent of GDP by the end of the 2025-26 fiscal year (FY) from 5.90 per cent in the current year to the end of March.

“To achieve the (2025-26) 4.5% deficit target, total expenditures would need to rise by no more than 7% per FY on average…meaning an even more aggressive cut to expenditures is likely in the coming years,” said Alexandra Hermann, lead economist at Oxford Economics.

‘Education should be the main priority’

“Continued and rapid improvement in India’s infrastructure will be paramount to reviving the private investment cycle,” Hermann said.

“But to leverage India’s huge potential and ensure sustainable and inclusive growth over the medium to longer term, human capital levels will need to improve, which is why spending on education should be the main priority.”

‘Informal sector continues to struggle’

“There are growth challenges that we remain wary of. Private non-infrastructure business capex is conspicuous by its relative absence,” said Kunal Kundu, India economist at Societe Generale.

“Stress is more visible in the rural areas as the informal sector continues to struggle, especially MSME (micro, small and medium enterprises) which are the biggest job generators.”

(Inputs from Reuters)

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