New Delhi: Analysts said on Tuesday that Finance Minister Nirmala Sitharaman would stick to the path of fiscal consolidation and would opt to reduce the FY24 fiscal deficit to 5.8 per cent in the upcoming budget. The government could go for a fiscal deficit number that would be lower than the 6.4 per cent of GDP budgeted for FY2023, he said, adding the budgeted figure for the next fiscal is in the range of 5.8 – 6 per cent.
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Given the fact that this will be the last full budget of the present government, one might be tempted to make it expansionary. In the two years following the pandemic, the fiscal deficit – one of the key parameters while assessing macroeconomic stability that also affects inflation – rose to 9.3 per cent.
Analysts have made it clear that India has to continue this journey of fiscal consolidation and does not have the luxury of pausing for the next few years. “The government’s promised fiscal consolidation path will require an uphill effort over the next few years. Think of it like a long-distance cyclist who needs to push hard to reach the finish line; if it suddenly stops If it does, it runs the risk of falling.” ,” HSBC India chief economist Pranjul Bhandari said in a note.
He said, “…a low fiscal deficit is critical to India’s broader stability, especially in an uncertain global environment.” SBI economists expect the fiscal deficit to come down to close to 6 per cent in the budget to be announced on February 1.
“The Budget FY24 challenges the government to stick to the fiscal consolidation road map amid a global environment of declining inflation,” said SBI economists. He said that India would have to grow rapidly to make this possible, given its projections on expenditure and revenue generation.
SBI economists expect expenditure to rise by 8.2 per cent, but the subsidy bill to come down and revenue to rise by 12.1 per cent. On the borrowing front, all analysts expect market borrowing of the government to be higher in FY24.
Japanese brokerage Nomura, which pegged the fiscal deficit at 5.9 per cent, said gross borrowing would increase to Rs 15.5 lakh crore from Rs 14.2 lakh crore in FY23, while SBI had estimated Rs 16.1 lakh crore. The HSBC note said that a year before the election is generally associated with lower privatization receipts and pressure on spending, and added this to the challenges that the government will have to deal with. It added that the markets would expect transparent and credible fiscal maths, direct tax reforms, lower duties on imports and an emphasis on capital expenditure in the budget.