Interim Budget: Govt's Commitment to Fiscal Consolidation

Last Updated: 25 Jun 2024

Interim Budget 2024 was as per expectations. The Government did not announce any major changes. Both direct and indirect tax rates were kept unchanged; same for corporate tax rate. Revised fiscal deficit estimate for FY 24 was announced at 5.8% of GDP. For FY 25, the fiscal deficit target has been set at 5.1% of GDP. The Finance Minister once again reiterated the government’s commitment to fiscal consolidation.

Government to keep its borrowings under check

The Finance Minister announced in the budget that the government will lower its borrowings so that interest rate for borrowings by private sector does not go up. When Governments borrow too much, it tends to raise interest rates for borrowings by the private sector. This is also known as crowding out of private investment. Lenders usually charge higher interest rates from private entities than they charge from governments. This announcement is a favorable aspect of the budget. It shows government’s sensitivity towards the need to keep interest rate low for the private sector.

Capital Expenditure outlay at 3.4% of GDP for FY 25

Capital expenditure outlay will be at 3.4% of GDP. This will be a year-on- year increase of 11.1%, to Rs 11.1 lakh crore. The Government continues to stick to its policy of giving boost to the economy through higher government investment and expenditures. The Budget announced building of 3 dedicated railway corridors for Energy, Minerals and Cement.

Interim Budget was more about highlighting the achievements in the past 10 years

The Interim Budget was more about highlighting the achievements of the incumbent government in the past 10 years. In the Budget just before elections, the Government shied away from announcing any populist scheme. The Budget did not announce any major scheme for the rural India, except for 2 crore houses to be built over the next 5 years under the Rural Housing Scheme.