The FY26 budget is expected to be even tighter, with a lower fiscal deficit target. The government surprised everyone by not announcing any new social schemes or expanding existing ones. Allocation for popular social schemes like MNREGA and Jal Jeevan Mission remains unchanged. The budget focuses on boosting the investment cycle, with a significant increase in government capex, particularly on infrastructure projects. The tight fiscal situation may lead to lower interest rates and the possibility of policy rate cuts.
The number that caught the attention of not only analysts but various numerologists as well was the capital expenditure number which was Rs 11.11 lakh crore for FY24-25. The angel number 1111 carries profound significance and guidance. It is believed to hold a message of hope, positivity, and alignment with the divine.
Some might fret over the likely impact on economic growth of the capex compression. However, GoI could well argue that the private sector is likely to step up in the next fiscal. Lower borrowings due to the deficit compression could reduce borrowing costs for the private sector and help investment recovery. The government bond market has responded well to the deficit (and borrowing)-reduction plans.
Official data suggests the centre's capital expenditure between April and September 2023 reached 49 per cent of its budgeted target of Rs 10 lakh crore for the fiscal year.