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.
