The upcoming 2024-25 budget is a pivotal opportunity for India’s new government to articulate its economic vision and policy priorities. Amidst a global economic slowdown, the nation must rely predominantly on internal drivers for growth. Striking a delicate balance between stimulating economic expansion and maintaining fiscal prudence will be paramount.
The Growth and Employment Imperative
The government’s short-term objective should be to secure a minimum growth rate of 7%, while aiming for a sustained medium-term growth trajectory of 7%-7.5%. This growth, coupled with a strategic focus on labor-intensive sectors, is expected to alleviate the immense pressure of job creation, particularly as millions of agricultural workers transition to urban areas seeking formal employment.
Navigating the Investment and Savings Landscape
To achieve and maintain a growth rate exceeding 7%, a real investment rate of 35% is essential. While recent data indicates a marginal increase in gross fixed capital formation (GFCF), further upward adjustments in savings and investment rates are necessary. A concerning trend is the decline in household financial savings, as this constitutes a crucial source of investible surplus alongside foreign capital inflows.
Budgetary Considerations and Fiscal Consolidation
The government’s revenue position is projected to improve compared to the interim budget, driven by higher tax and non-tax revenues. Assuming a nominal GDP growth of at least 11%, net tax revenue for the Centre is expected to surpass ₹26 lakh crore. Additionally, augmented dividends from the Reserve Bank of India (RBI) are anticipated to bolster non-tax revenues.
While this improved revenue scenario facilitates fiscal consolidation, the government must adhere to the 5.1% fiscal deficit target outlined in the interim budget. This necessitates judicious allocation of expenditure between revenue and capital components. Increased allocations for subsidies, healthcare, and rural employment schemes like MGNREGA may be required to support the vulnerable sections of the population.
Striking a Balance: Growth, Stability, and Fiscal Prudence
The budget must strive to harmonize growth with stability, encompassing both price stability and fiscal discipline. A commitment to the Fiscal Responsibility and Budget Management (FRBM) targets is crucial. A gradual reduction in the fiscal deficit, coupled with sustained nominal GDP growth, can initiate a virtuous cycle of reduced debt-to-GDP ratio and interest payments, further enabling fiscal consolidation.
Sunil Garnayak is an expert in Indian news with extensive knowledge of the nation’s political, social, and economic landscape and international relations. With years of experience in journalism, Sunil delivers in-depth analysis and accurate reporting that keeps readers informed about the latest developments in India. His commitment to factual accuracy and nuanced storytelling ensures that his articles provide valuable insights into the country’s most pressing issues.
