The interim budget for FY25, which will be presented on February 1 after the Lok Sabha elections, is likely to stay on the fiscal course-correction glide path and avoid populist spending. However, the retail industry s message of slowing consumption cannot be ignored. India s top retailers have slowed down their store expansion this fiscal year due to a sharper focus on profitability and lower-than-expected consumption levels. Retail sales have also been affected, with a growth of only 7% in October and November 2023 compared to the same period in 2022. The budget should focus on generating demand and spurring consumption by offering tax benefits and relief to individual taxpayers.
Budget 2024: The interim budget for FY25, which will be presented on February 1 after the Lok Sabha elections, is likely to stay on the fiscal course-correction glide path and avoid populist spending. However, the retail industry s message of slowing consumption cannot be ignored. India s top retailers have slowed down their store expansion this fiscal year due to a sharper focus on profitability and lower-than-expected consumption levels. Retail sales have also been affected, with a growth of only 7% in October and November 2023 compared to the same period in 2022. The budget should focus on generating demand and spurring consumption by offering tax benefits and relief to individual taxpayers.
Interim Budget: HSBC expects the central government to set a fiscal deficit target of 5.3% of GDP in FY25, with buoyant tax revenues and cuts in current expenditure. The government plans to bring the fiscal deficit down to 4.5% of GDP by FY26. Despite higher subsidy spending, the government is likely to meet the fiscal deficit target of 5.9% set for FY24 due to higher tax buoyancy. The government s spending on capital expenditure is expected to be lower than budgeted, contributing to deficit containment. HSBC also predicts that fiscal consolidation will lead to RBI delivering two rate cuts in FY25.
Budget 2024: India Ratings and Research (Ind-Ra) stated that the government aims to achieve a fiscal deficit to GDP ratio of 5.3% in FY25. However, it may miss the 5.9% target for FY24 due to a lower nominal GDP growth rate. The government plans to reduce the fiscal deficit to 4.5% of GDP by FY26. Ind-Ra projected a net tax revenue buoyancy ratio of 1.2x in FY25. It also noted a slowdown in capex growth in FY25 and limited scope for revenue expenditure rationalization.
Interim Budget: Finance Minister Nirmala Sitharaman will present the interim budget on February 1. There are hopes and expectations from various segments of the population regarding the budget. Some believe that Sitharaman might deliver a populist budget due to the upcoming Lok Sabha elections, while others think the government is not under pressure to please different voting segments. Another argument is that the budget might provide benefits to the bottom rungs of the economy, including rural and urban poor. The budget could also extend social security benefits to domestic workers as part of the proposed Social Security Code.