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Sunday, July 14th, 2024

Centre should target 4.9% fiscal deficit in 2024 and continue consolidation, suggests SBI Research

The Prime Minister Narendra Modi-led government should focus on adhering to fiscal prudence and move on the path of fiscal consolidation, SBI Research has suggested ahead of the much-awaited full Budget 2024-25 to be presented on July 23 – which will be the first budget under Modi 3.0.

The difference between the total revenue and total expenditure of the government is called the fiscal deficit. It is an indication of the total borrowing required by the government.

SBI Research suggested that the government should aim to limit the fiscal deficit to 4.9 per cent but it should not be too worried about the fiscal stance.

The government aims to bring down the fiscal deficit to below 4.5 percent of GDP by financial year 2025-26.

In the interim budget earlier this year, the government targeted fiscal deficit at 5.1 per cent of GDP for 2024-25.

However, based on higher dividends from PSUs and the RBI as well as a robust growth in GST revenues, SBI Research believes the government can keep the fiscal deficit budget for 2024-25 below 5 per cent – ​​at 4.9 per cent.

“As the fiscal deficit is reduced in the Budget, the government’s gross market borrowing will also decline to around Rs 13.5 lakh crore in FY25 from Rs 14.1 lakh crore in the interim Budget and net market borrowing will decline to Rs 11.1 lakh crore from Rs 11.8 lakh crore,” said the SBI Research report authored and conducted by Soumya Kanti Ghosh, group chief economic adviser, SBI.

“Furthermore, India’s inclusion in global bond indices would help stabilize yield curve movements,” it said.

The government had set the fiscal deficit target at 5.9 percent of gross domestic product (GDP) in 2023-24. Later it was reduced to 5.8 percent.

The interim budget presented on February 1 took into account the financial needs for the period till the formation of a government after the Lok Sabha elections, after which a full budget was to be presented by the new government in July.

With this upcoming budget presentation, Sitharaman surpasses the record set by former Prime Minister Morarji Desai, who as finance minister presented five annual budgets and one interim budget between 1959 and 1964. Sitharaman’s upcoming budget speech will be her sixth budget.

The government on Saturday announced the dates for the Budget session of Parliament which will begin on July 22 and end on August 12.

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