Interim Budget emphasises inclusive growth, fiscal discipline: SBI Research

Union Finance Minister Nirmala Sitharaman unveiled the Interim Budget 2024-25, aligning with the ethos of 'Sabka Saath, Sabka Vikas, and Sabka Vishwas,' and emphasizing a holistic national approach termed as 'Sabka Prayas.' The budgetary announcements encapsulate a mix of socio-economic measures and fiscal prudence, SBI Research said in a report.

Finance Minister highlighted a major achievement in reducing income inequality for casual workers in rural areas, particularly among males. Drawing from the Periodic Labor Force Survey (PLFS) data, the Gini coefficient for income of rural male casual workers decreased from 0.482 in FY20 to 0.426 in FY23. This decline underscores a positive trend in spreading prosperity across rural landscapes, countering distortions from selective perspectives, the research arm of the country’s largest bank said.

The budget aspires to achieve a fiscal deficit level below 4.5 per cent of GDP by 2025-26. For the fiscal year 2024-25, the fiscal deficit is set at 5.1 per cent, a notable reduction from the revised 5.8 per cent budgeted for 2023-24. Anticipating even lower deficits based on current trends, Finance Minister expressed confidence in conservative tax buoyancy estimates for FY24 and FY25, SBI Research noted.

Gross tax revenue for FY24 is projected to grow by 12.5 per cent to Rs 34.3 lakh crore, exceeding the initial budgeted Rs 33.60 lakh crore. For FY25, the government has earmarked gross tax revenue of Rs 38.3 lakh crore, reflecting an 11.5 per cent growth. The tax-to-GDP ratio stands at 11.7 per cent, the highest in 16 years. The GST collection target for FY25 is set at Rs 10.7 lakh crore, marking an 11.6 per cent increase over the FY24 revised estimates. Major subsidies are expected to decline by 7.8 per cent to Rs 3.8 lakh crore, SBI Research said.

The budget allocated 11.1 per cent increase in capital expenditure outlay for the next fiscal year, amounting to Rs 11.11 lakh crore, equivalent to 3.4 per cent of GDP. The continuation of the 50-year interest-free loan scheme for capital expenditure to states is announced, with a total outlay of Rs 1.3 lakh crore. A provision of Rs 75,000 crore as a 50-year interest-free loan is proposed to support milestone-linked reforms at the state level, the Mumbai-based firm added.