India’s Finance Minister Nirmala Sitharaman holds up a folder with the Government of India’s logo as she leaves her office to present the federal budget in the parliament, before the nation’s general election, in New Delhi, India, February 1, 2024.
| Photo Credit: REUTERS

The government under Prime Minister Narendra Modi should focus on adherence to fiscal prudence and continue on the fiscal consolidation path, suggested SBI Research ahead of the much-awaited full Budget for 2024-25 to be tabled on July 23 – the first Budget under Modi 3.0.

What is fiscal deficit?

The difference between total revenue and total expenditure of the government is termed as fiscal deficit. It is an indication of the total borrowings that may be needed by the government.

SBI Research suggested that the Centre should target a fiscal deficit of 4.9%, but it must not obsess too much over the fiscal stance. The Government intends to bring the fiscal deficit below 4.5% of GDP by the financial year 2025-26.

In the Interim Budget earlier this year, the Government has targeted a fiscal deficit of 5.1% of GDP for 2024-25. However, SBI Research believes that the Government may budget a fiscal deficit of less than “5% — may be 4.9% — for 2024-25” due to stellar growth in GST revenues and higher dividends from PSUs and RBI.

State borrowings

As the budgeted fiscal deficit gets lowered, the gross market borrowing of the government will also reduce to around ₹13.5 lakh crore in FY25 compared to ₹14.1 lakh crore in the interim budget and net market borrowing to ₹11.1 lakh crore against ₹11.8 lakh crore earlier, the report, authored and led by Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI, said. “This along with India’s inclusion in Global Bond indices will keep the yield curve movements anchored,” it added.

In 2023-24, the Government pegged the fiscal deficit target for FY2023-24 at 5.9% of gross domestic product (GDP). Later, it was downwardly revised to 5.8%.

The interim budget, tabled on February 1, took care of the financial needs of the intervening period until a government was formed after the Lok Sabha polls, after which a full budget was supposed to be presented by the new government in July.

FM Sitharaman to break record with sixth budget presentation

With this upcoming Budget Presentation,surpassed the record set by former Prime Minister Morarji Desai, who as finance minister, presented five annual budgets and one interim budget between 1959 and 1964.

Mrs. Sitharaman’s upcoming Budget speech would be her sixth.The government on July 6 announced the dates of the Budget session of Parliament which will start on July 22 and conclude on August 12.

Union Minister of Finance and Corporate Affairs Nirmala Sitharaman chairs the eighth Pre-Budget consultation with representatives of the Employment and Skilling division. File.
| Photo Credit: PTI

Finance Minister Nirmala Sitharaman has concluded consultations with various stakeholders, including representatives of industry and social sectors, as part of the budget preparation exercise.

Ms. Sitharaman will present her seventh Budget on July 23. This would be the first full budget of Modi 3.0 which is going to set the path for Vikshit Bharat (developed India) by 2047.

Also read | Govt said to plan raise in rural housing subsidies by 50% after election setback

Last month, President Droupadi Murmu, while delivering her address to the joint sitting of Parliament, had said that many historic steps and major economic decisions will be taken in the upcoming budget session.

In her first address to the joint sitting of Parliament since the constitution of the 18th Lok Sabha, the President said, “This budget will be an effective document of the government’s far-reaching policies and futuristic vision”.

“Along with major economic and social decisions, many historic steps will also be seen in this budget,” she said.

The Finance Ministry in a statement said the pre-budget consultations for Union Budget 2024-25 that started from June 19 onward concluded on July 5, 2024.

In the course of in-person consultations, more than 120 invitees across 10 stakeholder groups, including experts and representatives from farmer associations and agriculture economists; trade unions; education & health sector; employment & skilling; MSME; trade & services; industry; economists; financial sector & capital markets; as well as, infrastructure, energy and urban sector, participated in the meetings, it said.

These meetings chaired by the Finance Minister witnessed the participation of Minister of State for Finance Pankaj Chaudhary; Finance Secretary and Secretary Expenditure, T V Somanathan; Economic Affairs Secretary, Ajay Seth, DIPAM Secretary, Tuhin K Pandey, Financial Services Secretary Vivek Joshi and Revenue Secretary, Sanjay Malhotra among others.

In the course of the consultations, Sitharaman expressed gratitude to the participants for sharing valuable suggestions and assured experts and representatives that their suggestions would be carefully examined and considered while preparing the Union Budget 2024-25.

Union Finance Minister Nirmala Sitharaman presents the Union Budget 2023-24
| Photo Credit: PTI

The government plans to borrow a record ₹15.4 lakh crore from dated securities in FY24 to meet its expenditure requirement to prop up the economy.

This is higher than the total borrowing of ₹14.21 lakh crore for the current financial year ending March 31, 2023.

Also Read | Budget 2023 | How is money allocated and where does it come from?

Finance Minister Nirmala Sitharaman while presenting the Budget on February 1 said the net market borrowings from dated securities are estimated at ₹11.8 lakh crore to finance the fiscal deficit in 2023-24.

“The balance financing is expected to come from small savings and other sources. The gross market borrowings are estimated at ₹15.4 lakh crore,” she said.

The government has raised ₹12.93 lakh crore till January 27, which is 91% of the overall borrowing target of ₹14.21 lakh crore estimated for 2022-23.

The indebtedness of the Centre and State governments together is equal to 83% of the annual gross domestic product (GDP).

The Finance Minister retained the fiscal deficit target at 6.4% despite an increase in the subsidy bill.

“Coming to 2023-24, the total receipts other than borrowings and the total expenditure are estimated at ₹27.2 lakh crore and ₹45 lakh crore, respectively. The net tax receipts are estimated at ₹23.3 lakh crore,” she said.

She pegged the fiscal deficit at 5.9% of GDP for FY24.

“In my Budget Speech for 2021-22, I had announced that we plan to continue the path of fiscal consolidation, reaching a fiscal deficit below 4.5% by 2025-26 with a fairly steady decline over the period. We have adhered to this path, and I reiterate my intention to bring the fiscal deficit below 4.5% of GDP by 2025-26,” she said.

Also Read | Budget likely to cap fiscal deficit at 5.8% for FY24; Centre’s borrowings to rise

Ms. Sitharaman had pegged gross market borrowing through dated securities for 2022-23 at ₹14,95,000 crore.

However, the government in September 2022 decided to cut the gross borrowing to ₹14.21 lakh crore during FY23. The gross borrowing for 2021-22 was ₹12,05,500 crore.

With regard to the net borrowing, the government estimated a record ₹11.6 lakh crore raising from the market in 2022-23.

This was nearly ₹2 lakh crore higher than the current year’s Budget estimate of ₹9.7 lakh crore.

The total market borrowings of the government for 2022-23 are estimated at ₹11,58,719 crore, according to the previous Budget document.

The revised estimates for the same for 2021-22 are ₹8,75,771 crore against the Budget estimates of ₹9,67,708 crore.

See all 67 stories