The Union Budget is likely to prioritize boosting consumption in the upcoming financial year (FY25) by allocating more funds to rural development, welfare programs, and agriculture, according to a report by CareAge Ratings. This is indicated by the expected increase in allocation for key schemes like PMAY (Pradhan Mantri Awas Yojana) and MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act).
- The budget is expected to allocate more funds towards uplifting the rural economy.
- Increased spending on social welfare programs is anticipated.
- The government is likely to prioritize agriculture with higher budget allocations.
The report also suggests the government’s focus on manufacturing and capital expenditure (capex) will likely continue. This is evident by the anticipated retention of the interim budget’s capex target of Rs 11.1 lakh crore. An increase in allocation under the Production Linked Incentive (PLI) scheme for labor-intensive sectors. Like textiles, leather footwear, and toys are expected to aid job creation.
CareEdge Ratings expects higher-than-anticipated revenue from the Reserve Bank of India (RBI) to provide an additional Rs 1.25 lakh crore to non-tax revenue compared to the budgeted amount. This is coupled with a projected 11% growth in gross tax revenue. Exceeding the budgeted growth of 10.6% is likely to lead to a total upside of Rs 1.4 lakh crore in overall revenue collection. The report predicts a marginal increase in tax buoyancy to 1.04 in FY25 from the budgeted 0.96.
Balancing Growth with Fiscal Prudence
This additional revenue growth is expected to aid in reducing the fiscal deficit target for FY25 to 5% of GDP. Even after accounting for higher revenue expenditure. CareEdge Ratings expects an increase in revenue expenditure of Rs 75,000 crore compared to the Interim Budget estimate.
CareEdge Ratings forecasts a higher nominal GDP growth projection for FY25 at 10.7%. Compared to the interim budget estimate of 10.5%. The report highlights a rise in general government debt to 83% of GDP in FY24, resulting in a high-interest burden. This highlights the continued need for fiscal consolidation, sovereign rating agencies are keeping a close eye on India’s debt trajectory. The report concludes by stating that government borrowing is expected to decline, with net borrowing falling in the range of Rs 11.2-11.4 lakh crore, lower than the Rs 11.8 lakh crore projected in the Interim Budget.
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