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February 02, 2024

Continuity on three fronts

  • Fiscal consolidation: Despite the imperative of supporting growth, fiscal consolidation continues. The fiscal deficit for next year is estimated at 5.1% of GDP, compared with 5.8% in this fiscal. With that, the central government will be 60 basis points away from the glide path of ~4.5% fiscal deficit by fiscal 2026. The reduction in the target for fiscal 2025 is attributable to lower revenue spends and robust revenue collections amid moderation in capex growth.
  • Capex thrust to the economy: Even as budgetary government capex growth is set to moderate to 17.7% next fiscal from 21.5% in the current one, the level of capex remains high with core infrastructure sectors seeing an increase in allocations, but at a slower pace.
  • Transparency in capex: The interim budget continues to lean on budgetary support for capex rather than on public sector units (PSUs), or internal and external budgetary resources (IEBR) - also referred to as off-budget. The share of PSU capex in total capex has been consistently falling from a peak of ~57% in fiscal 2018 to a budgeted 18.6% in fiscal 2025. This reduces the dependence on off-budget borrowings by PSUs to incur capex.
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