Budget 2024 Expectations: Economists batted for continuing the capital spending push to spur growth, fiscal prudence and steps to boost jobs. The focus on the quality of spending, sans mindless freebies and steps to further curb inflationary pressure should continue, some of the economists told Finance Minister, Nirmala Sitharaman at the meeting, advising against reckless giveaways. Successful tackling of inflation, they said, would be the biggest pro-poor move.
The Government has shown fiscal prudence for a long time. This should continue, especially for keeping inflation under check, said Ashwani Mahajan, national co-convener of the Swadeshi Jagaran Manch. In the interim budget, the Government had set the FY25 fiscal deficit goal at 5.1% of gross domestic product (GDP) and revised the FY24 estimate to 5.8% from the previously budgeted 5.9%.
It ended up improving on the revised estimate for FY24, containing the fiscal gap at 5.6%. It aims to rein in the deficit at 4.5% by FY26. In the first consultation meeting with the finance minister for next month’s Budget, the economists also acknowledged the Government’s sustained hike in capital spending in the post-pandemic era. The Centre has increased its capex by 17-39% annually since FY22, way above the increase in revenue spending. The outlay of Rs 11.11 lakh crores in the interim Budget for FY25 marks a 17% increase from the previous year.
Tax exemption: Some economists rooted for indexing various tax exemption limits, including income tax for individuals, to retail inflation. Such a move, they said, would leave more disposable income with people by lowering tax liabilities, especially for the middle class. It will also help lift the subdued increase in private consumption expenditure. This, in turn, would aid overall economic growth.
Others suggested that the current consumer price index (CPI) was “outdated” given that the base year and the methodology haven’t been tweaked to reflect today’s consumption pattern (the current CPI base year is 2012). One of the economists pitched for discouraging retail investors who are not well conversant with stock markets to trade in derivatives, while another called for steps to curb unabated flow of sub-standard goods from China.
About a dozen economists took part in the consultation meeting and had their say before Sitharaman, Minister of State for Finance, Finance Secretary, Economic Affairs Secretary, other Secretaries of the Finance Ministry and Chief Economic Advisor. The outgoing Government had presented the interim Budget for FY25 in February, leaving the task of introducing the full Budget after the general elections. The Indian economy has witnessed an average of over 8% annual growth since the Covid-induced output contraction in FY21. The economy beat forecasts to grow 8.2% last fiscal and the Reserve Bank of India expects it to expand 7% in FY25 even on the unfavorable base.
