Budget 2024-25: A look at the key macro numbers

Ahead of the presentation of the Union Budget 2024-25 on Tuesday, there’s expectations that Finance Minister Nirmala Sitharaman would announce at least a few populist schemes that would help boost the rural economy and also create jobs.

What’s more with at least three states slated to go for Assembly elections this year — Maharashtra, Haryana, and Jharkhand — and Delhi to have elections early next year, it is expected that the Budget would have some announcements aimed at wooing voters.

Analysts and experts believe that the Centre has space to take some additional spending but do not foresee a sharp rise in the capital expenditure bill.

“The government has done a deft job on the fiscal side and it is expected that prudence will continue to remain important to ensure macro stability,” said FICCI in its Economic Outlook Survey, adding that participants felt that the government has an opportunity to leverage additional resources from robust tax collections and the Reserve Bank of India's dividend transfer. “This fiscal headroom could be used to increase spend on social sector schemes especially to support the rural economy. Furthermore, subsidy estimates are anticipated to remain stable, reflecting a focus on targeted benefit delivery,” it said in a statement on Thursday.

“While we expect the government to stick to their fiscal deficit target of 5.1% for FY25E, due to better nominal GDP projection, RBI dividend and tax collections, the government has a leeway of about Rs 1.5 lakh crore additional expenditure that it can incur and still keep the fiscal deficit targets maintained for FY25,” said a note by Macquarie economists Suresh Ganapathy, Punit Bahlani and Aditya Suresh, adding that they will be closely observing the Budget for any populist schemes and rise in revenue account expenditure. The revenue account was Rs 36.5 lakh crore and capital account was Rs 11.11 lakh crore as per the Interim Budget. “We expect the revenue account expenditure to possibly increase by about Rs 75,000 crore to Rs 80,000 crore in the Union Budget,” they said, adding that additional allocations could be done towards PM Kisan scheme, MNREGA and others.

The economy seems to be well placed for this with economic growth seen to maintain a 7% -plus trajectory, tax collections remaining robust and the fiscal deficit well under control. Concerns for the economy remain the subdued consumer demand, volatile exports and high inflation. Here’s a look at key macro data that could shape policy decisions:

GDP Growth: There seems to be growing consensus that the Indian economy is likely to grow at 7%, if not more, this fiscal. While the Reserve Bank of India has projected the GDP growth rate at 7.2% this fiscal, the International Monetary Fund has also recently upped its India forecast to 7% this fiscal from its previous estimate of 6.8%. The Asian Development Bank in its latest update has also maintained India’s GDP growth forecast at 7% for the fiscal.

Tax collections: Both direct and indirect tax collections have remained healthy in the first quarter of the current fiscal and there are expectations that the Budget 2024-25 may up the tax collection targets for FY 25. Net direct tax collections grew by 19.54% this fiscal till July 11 to Rs 5.74 lakh crore while gross collections grew by an even higher 23.24% to Rs 6.45 lakh crore. Gross collections from goods and services tax slowed in June and grew by 7.74 lakh crore to Rs 1.74 lakh crore. The Interim Budget had pegged gross tax collections to grow by 11.5% to Rs 38.3 lakh crore over the Revised Estimate of Rs 34.4 lakh crore for this fiscal. However, the mop up from both direct and indirect taxes exceeded the target for FY24.

Fiscal Deficit: The Centre has pegged its fiscal deficit at 5.1% for FY25 in the Interim Budget. But the actual performance in FY24 was much better at 5.6% compared to the Revised Estimate of 5.8% and with a bumper dividend from the Reserve Bank of India, it is expected that the Centre could continue the path of fiscal consolidation and marginally lower its fiscal deficit target for FY25 even while enjoying headroom for some additional spending.

Inflation: Price rise has been a tricky issue for the government with food inflation burning a hole in the pockets of consumers even as core inflation has remained well within control. Retail inflation surged to 5.1% in June this year with food inflation at 9.4% in the month. Wholesale price index based inflation also rose to 3.4% in June, which was a 22-month high, led by costlier vegetables, cereals and fruits. Analysts expect inflation to ease in coming months and average at around 4.5% this fiscal in line with the RBI’s projection for the fiscal.

Exports: India’s exports have reflected the subdued global growth in the last fiscal as well as this fiscal. While the Centre expects merchandise exports to touch $800 billion this fiscal, goods exports have so far seen feeble growth with a 2.55% expansion in June to $35.2 billion. Imports grew faster in the month by 5% to $ 56.2 billion and the trade deficit widened to $21 billion.