Budget 2025 signals policy continuity by sticking to fiscal rectitude: QuantEco

Interim Budget 2024: The interim Budget is out, the focus areas of the government are all known, the priorities are set, and the roadmap is laid out. Some are calling it a non-populist and pragmatic budget, and some are calling it prudent. Some see this as a trailer as the full budget will be out with a proper roadmap and vision to be a developed nation by 2047.  However, QuantEco economists believe that this interim budget for FY25 signals policy continuity by sticking to fiscal rectitude, thrust on maximizing bang for the buck via prioritization of hard capex, housing and digital penetration. 

According to QuantEco, lowering the fiscal deficit target by 70 bps to 5.1 per cent of GDP in FY25 strengthens the government’s commitment to preserving macro-financial stability while being prudent enough to ensure that the gradual tapering of fiscal accommodation in the post-pandemic phase does not result in any economic withdrawal symptoms. 

Talking about the market perspective, the economists from QuantEco said, “Focusing on maintaining superior quality of spending (which continues to favour a high growth multiplier) along with better-than-expected fiscal consolidation is a welcome move. The gross borrowing target of Rs 14.13 tn is lower than the market expectation of Rs 15-16 tn (although it's close to our expectation of Rs 14.5 tn),”

With FY25 likely to see support from an anticipated pivot in monetary policy across key economies and with India’s inclusion in the EM bond index, we continue to expect 10Y g-sec yield to drift lower towards 6.50 per cent levels by March 25.