SBI Research urged the government to strike the right balance between fiscal consolidation and growth promotion, and recommended bringing down the fiscal deficit to a maximum of 4.9 per cent in FY25, against the 5.1 per cent target laid down in the interim budget.
“The government should focus on maintaining fiscal soundness and continue on the path of fiscal consolidation, but at the same time refrain from over-focusing on the fiscal stance, which could hinder long-term sustainable growth. An appropriate balance should be struck by limiting fiscal consolidation to a maximum of 20 basis points this fiscal year,” the report said.
In the interim budget released earlier this year, the fiscal deficit target was set at 5.1% of GDP for 2024-25.
SBI Research also expects capital expenditure, which has been a key pillar of the central government’s growth strategy, to be increased to Rs 11.8 trillion from Rs 11.11 trillion projected in the interim budget.
In addition, nominal GDP growth is expected to remain at 11%, while total tax revenue is expected to increase by more than 13%, resulting in tax revenue growth of 1.2-1.3%.
Marketing Margin
“As the budgeted fiscal deficit is reduced, the government’s gross market borrowings will also come down to around Rs 13.5 lakh crore in FY25 from Rs 14.1 lakh crore in the interim budget, while net market borrowings will also come down to Rs 11.1 lakh crore from Rs 11.8 lakh crore earlier,” said an SBI Research report authored and led by Sowmya Kanti Ghosh, group principal economic advisor at SBI.
This, along with India’s inclusion in the global bond index, will help stabilise yield curve movements, the research report added.
The government had initially set the fiscal deficit target for 2023-24 at 5.9% of GDP, which was later revised downwards to 5.8%.
