NEW DELHI
:
Finance minister Nirmala Sitharaman presents her sixth annual budget, albeit an interim one, today, likely furnishing a report card on the government’s performance in the past five years. Here are five key numbers to watch out for and cut through the economic jargon:
Nominal GDP growth
The budget could highlight how India remains poised to outpace every other nation as the fastest growing economy, projecting around 11% growth in nominal GDP for FY25. Last year’s budget had projected a growth rate of 10.5% while the first advance estimate by National Statistical Office put it at 8.9% for FY25. After very high nominal GDP growth of 18.4% in 2021-22 and 16.1% in 2022-23, the tapering off is a reflection of normalizing base effect. In 2020-21, the economy had contracted by 1.4% due to the pandemic, lowering the base. The high growth projection for next fiscal would help lower fiscal deficit.
Capital expenditure
Over the past few years, the country’s economy has grown on the back of some heavy lifting by the government, which increased capital expenditure amid subdued private investment sentiment. In the Union budget of 2023-24, capital expenditure was increased by over 33% to a record ₹10 trillion. For the next financial year, capex is likely to go up further—albeit at a lower pace—to over ₹11 trillion. There are, however, some signs of a cooling in investment as some analysts say the government may have missed the ₹10 trillion target for 2023-24. In an election year, the expenditure typically takes a breather and that may have a bearing, too.
Tax mop-up
Good tax buoyancy provides a cushion for the government to spend more on welfare while keeping the fiscal deficit in check. In the last two fiscals, tax receipts exceeded estimates. For the current year, they are again likely to exceed estimates—at around ₹25 trillion against the budgeted ₹23.3 trillion. However, don’t expect the government to be too adventurous while setting a target for the next fiscal.
Fiscal deficit
Having deviated from the fiscal glide path during the pandemic, one thing that’s worth watching is how close to 5% the Centre projects the fiscal deficit for FY25. While the recommended glide path was 2.5% by FY23, the deficit shot up from 3.8% in FY20 to 9.2% in FY21 as the Centre grappled with the pandemic. The government then vowed to bring it down to 4.5% by FY26 and projected a deficit of 5.9% in FY24. The budget is expected to show it has met that target and present a lower number of around 5.3% even as capex could increase.
Disinvestment
The government has a patchy disinvestment record with stake sales in public sector units delayed. The past few years have seen the target getting reduced but still not achieved. Post 2017-18, when divestment proceeds hit a record ₹1 trillion, and 2018-19 when proceeds exceeded estimates, the government has hiked targets only to miss them. For 2023-24, the target was fixed at ₹51,000 crore, more than 20% lower than 2022-23, and it is likely to be missed by 60%. In the budget, the target is likely to be pruned further.