The Interim Budget for 2024-25 might not have dazzled voters with extravagant promises, but Union Finance Minister Nirmala Sitharaman has made sure to prioritize fiscal responsibility while still emphasizing capital spending for the upcoming financial year.

During the presentation of the Interim Budget, Sitharaman revealed that the fiscal deficit for 2023-24 is expected to be slightly better than anticipated, standing at 5.8% of the GDP compared to the budgeted 5.9%. Furthermore, she announced plans to reduce it even further to 5.1% in the next fiscal year.

"We are staying committed to our goal of fiscal consolidation, aiming to bring the fiscal deficit below 4.5% by 2025-26. In line with this, the estimated fiscal deficit for 2024-25 is 5.1% of GDP," stated the minister on Thursday.

The government has adopted a cautious approach regarding economic growth, projecting a nominal GDP growth of 10.5% for FY25.

"The initial analysis of the budget speech and fiscal deficit projections for FY24 and FY25 indicates the government's determination to achieve the fiscal consolidation target of 4.5% fiscal deficit by FY26. The assumptions regarding nominal GDP growth and revenue buoyancy seem reasonable and in accordance with our expectations," commented Devendra Kumar Pant, Chief Economist & Senior Director– Public Finance, India Ratings and Research.

In addition to maintaining fiscal discipline, Sitharaman announced an 11.1% increase in capital expenditure to Rs 11.1 lakh crore for 2024-25, which amounts to 3.4% of the GDP.

However, the Revised Estimate for capital expenditure this fiscal has been slightly reduced to Rs 9.5 lakh crore from the Budgeted Estimate of Rs 10 lakh crore.

To further stimulate growth, the Government has allocated Rs 1.3 lakh crore in Budget Estimate 2023-24 towards interest-free loans to the States over 50 years to boost their capital expenditures. This scheme will continue this year as well, she added.

Meanwhile, total expenditure for FY25 is projected to grow by 5.8% to Rs 47.65 lakh crore from the Revised Estimate of Rs 44.9 lakh crore for FY24.

"The higher-than-expected capital expenditure and lower-than-projected fiscal deficit indicate that the quality of spending will be better than initially anticipated for both FY2024 and FY2025. Quicker fiscal consolidation and reduced borrowing will likely contribute to lower yields in the coming year, provided revenue and capital receipt estimates remain credible as the year progresses," remarked Aditi Nayar, Chief Economist, Head - Research & Outreach, ICRA.

The government finds comfort in robust growth in tax revenue collections. Gross tax revenue for FY25 is estimated to grow by 11.6% to Rs 38.3 lakh crore.

In the Revised Estimate for FY24, gross tax revenue is marginally higher by 2.29% at Rs 34.37 lakh crore compared to the Budget estimate of Rs 33.6 lakh crore.

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