The interim budget for next fiscal will be framed against the backdrop of a resilient Indian economy amid elevated global risks. In the forthcoming budget, the government needs to bring down fiscal deficit target further to be on the glide path to 4.5% by FY26.
This is important for three reasons: One, fiscal consolidation is crucial as India has highest debt/GDP ratio among similarly rated sovereigns, making it vulnerable on that count.
Two, India's inclusion in JP Morgan Bond Index subjects it to higher fiscal scrutiny from foreign investors.
And three, fiscal consolidation will support the efforts of Reserve Bank of India to come near its medium-term inflation target of 4%.
Dharmakirti Joshi
Chief Economist
CRISIL
The 2023–24 Budget reflected a 33 per cent increase in capital expenditure to ₹10 lakh crore, indicating a continued focus on infrastructure spending. As for the upcoming Budget, we expect increased spending, particularly on railways, and a continued focus on roads.
Would like to emphasize the importance of public-private partnerships (PPP) in accelerating infrastructure development, with examples of the National Highways Authority of India identifying 50 projects for PPP.
Jagannarayan Padmanabhan
Senior Director and Global Head Consulting- Transport, Logistics and Mobility
CRISIL MI&A
In the agricultural sector, 10 years back the short term measures used to occupy only about 10% of the allocation but in last year's budget it was about 90% of the allocation. So there are more short-term measures being prioritized where the farmers can see immediate results and immediate cash in hand.
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.
As we step into 2024, the Indian economy stands resilient despite being buffeted by global and domestic headwinds.
Opportunities abound alongside challenges for the world's fastest-growing economy, making accurate anticipation and effective strategy crucial for the road ahead.
Join us on March 6 at CRISIL's 8thIndia Outlook seminar, where we will deep-dive into the pivotal factors moulding the country's economic peaks and troughs and explore the path we need to take.
Our in-house experts and eminent speakers will unbox their insights on a gamut of factors that promise to lift or threaten to drag India's growth trajectory as the year unfolds.
Please save the date for some thought-provoking discussions, valuable learnings and connect with industry leaders.
