Finance Minister Nirmala Sitharaman is set to unveil India’s seventh consecutive budget on Tuesday. This budget holds significant importance as it will outline a roadmap for achieving ‘Viksit Bharat’ (developed India) by 2047, while also providing a glimpse into the nation’s economic performance over the past decade. All eyes will be on whether Sitharaman delivers the anticipated tax relief for the middle class, leaving more disposable income in their hands, as the government enjoys tax buoyancy. Additionally, the market expects the government to maintain its fiscal glide path, aiming to reduce the fiscal deficit to 4.5% of GDP by 2025-26.
Sitharaman, who has been responsible for presenting the budget for the past six years, made a notable change in her first budget in 2019. She replaced the traditional leather briefcase, used for decades to carry budget documents, with a traditional ‘bahi-khata’ wrapped in red cloth. This year, the budget will be presented in a paperless format, following the practice of the last three years.
As the first full budget of Modi 3.0, this budget will be closely scrutinized for its key numbers. The budgeted fiscal deficit, the difference between government expenditure and income, is currently projected at 5.1% for the current fiscal year, according to the Interim Budget presented in February. This is compared to 5.8% in the last fiscal year. The full budget is expected to provide more optimistic projections due to tax buoyancy. The government has set a target of 4.5% of GDP for the fiscal deficit in FY26.
The government’s planned capital expenditure for this fiscal year is budgeted at Rs 11.1 lakh crore, significantly higher than the Rs 9.5 lakh crore spent in the previous fiscal year. The government has been actively promoting infrastructure development and encouraging states to increase their capital expenditure.
The Interim Budget estimated gross tax revenue at Rs 38.31 lakh crore for 2024-25, representing an 11.46% growth over the previous fiscal year. This includes an estimated Rs 21.99 lakh crore from direct taxes (personal income tax and corporate tax) and Rs 16.22 lakh crore from indirect taxes (customs, excise duty, and GST).
Goods and Services Tax (GST) collection in 2024-25 is projected to reach Rs 10.68 lakh crore, an increase of 11.6%. The final budget for the 2024-25 fiscal year will be closely monitored for its tax revenue figures.
The government’s gross borrowing budget for the current financial year, as per the Interim Budget, was Rs 14.13 lakh crore. The government relies on market borrowing to fund its fiscal deficit. The borrowing figures will be carefully observed by the market, especially given the higher-than-expected dividend received from the RBI and financial institutions.
India’s nominal GDP growth (real GDP plus inflation) is estimated to be 10.5% for the current fiscal year, reaching Rs 327.7 trillion, according to the Interim Budget. With an expected normal monsoon, improved revenue collections, and a pick-up in rural consumption, there is a possibility of an upward revision in the growth estimate. The RBI has projected real GDP growth for the current fiscal year at 7.2%.
The Interim Budget had projected Rs 1.02 lakh crore from the RBI and financial institutions. This figure is expected to be revised upwards, as the RBI has already transferred a surplus of Rs 2.11 lakh crore earlier in May. Additionally, the government anticipates generating Rs 43,000 crore from CPSEs.
The budget will also shed light on spending allocated to key schemes, such as NREGA, and essential sectors like health and education.
