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Tuesday, May 28, 2024

Budget pegs fiscal deficit target in FY24 at 5.9 pc of GDP

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New Delhi: Continuing the path of fiscal consolidation, Finance Minister Nirmala Sitharaman on Wednesday pegged the fiscal deficit target at 5.9 pc of GDP during financial year 2023-24 as compared to 6.4 pc for the current financial year.

The government intends to bring the fiscal deficit below 4.5 pc of GDP by 2025-26.

To finance the fiscal deficit in 2023-24, the net market borrowings from dated securities are estimated at Rs. 11.8 lakh crore. The balance financing is expected to come from small savings and other sources. The gross market borrowings are estimated at Rs. 15.4 lakh crore.

“The fiscal deficit is estimated to be 5.9% of GDP (in FY24). In my Budget Speech for 2021-22, I had announced that we plan to continue the path of fiscal consolidation, reaching a fiscal deficit below 4.5% by 2025-26 with a fairly steady decline over the period. We have adhered to this path, and I reiterate my intention to bring the fiscal deficit below 4.5% of GDP by 2025-26,” said Sitharaman while presenting the last full budget of the Modi government 2.0.

In order to boost the economic growth, Sitharaman announced to raise capex by 33 pc to Rs 10 lakh crore in the coming fiscal.

Commenting on Budget, Namrata Mittal, CFA & Senior Economist, SBI MF said that Union Budget 2023 has built on the foundation laid in prior budget- fiscal prudence without compromising growth.

“Fiscal deficit is expected to consolidate by 50 bps to 5.9% in FY24 with a vision to consolidate to 4.5% by FY26. The quality of expenditure has improved with capex to GDP rising to 3.3% of GDP (vs. sub 2% pre-COVID). Massive increase in capex outlay alongside reduced tax liability on personal income tax is a twin approach to boost both infrastructure and consumption spending,” said Mittal.

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