Interim Budget 2024: The Centre is planning to cut its budget deficit by at least 50 basis points in 2024/25 from 2024's target of 5.9 per cent of gross domestic product (GDP), while also looking to raise capital spending by as much as 20 per cent, a report said on Thursday.
A budget deficit is a situation that arises when the extent of spending surpasses the extent of income in an economy. While fiscal deficit is a shortcoming in the income of a government as compared to its spendings. It is the difference between the total income of the government and the total expenditure incurred by it. This difference is filled by government borrowings.
The plan to lower the fiscal deficit by at least 50 basis points is being discussed along with other scenarios for the budget year starting in April, a top government source told Reuters. The government is confident of meeting its 5.9 per cent target for the current year ending on March 31, the official added.
The Centre is trying to raise capital spending on building infrastructure to as much as Rs 12 lakh crore from the current year's plan of Rs 10 lakh crore.
Shrinking the fiscal deficit and yet at the same time increasing capital spending will depend on an increase in revenues and efforts to curb subsidies, said Devendra Pant, an economist at India Ratings.
In recent years, India has become one of the world's fastest-growing economies largely due to the government's increasing infrastructure push and spending.
However, high inflation has slowed consumption in the country. Cutting the fiscal deficit sharply will reassure foreign investors and rating agencies, who doubt India can reduce the deficit to under 4.5 per cent of GDP in the next two years.
The government is also mindful of the target as a new set of investors would be carefully assessing the government's debt levels following their inclusion in the JPMorgan and Bloomberg emerging market indexes.
Earlier Business Today reported that the Centre's capital spending from April to September 2023 was 49 per cent of its budgeted Rs 10 lakh crore for the fiscal year FY24. September saw the highest monthly capital expenditure this year at Rs 1.16 lakh crore.
Over time, major infrastructure organisations like the National Highways Authority of India and Indian Railways have become more dependent on budget allocations as well. The government may also continue its policy of providing long-term, interest-free capital expenditure loans to states in 2024-2025 to boost economic activity across the country.
Of the total budget of Rs 1.30 lakh crore for 2023-24, the government has allocated over 70 per cent to states under the scheme in the first seven months (April-October) of the current fiscal year.
The government aims to stay on track for fiscal consolidation, targeting a fiscal deficit of 5.9 per cent this year and 4.6 percent by 2026.
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