Interim Budget prioritises fiscal consolidation, says Emkay Global

The interim budget is short of any big bang announcements, but the policy prerogatives and spirit has not derailed, said Madhavi Arora, Lead Economist at Emkay Global Financial Services

“There has been continued pace of fiscal consolidation in line with the fiscal road map and policy priorities further getting more targeted and focussed. Fiscal counter-cyclicality is a welcome move amidst improving growth impulse as it addresses the challenging debt dynamics. However, the scaling back of centre’s fiscal both in FY24 (5.8 per cent) and FY25BE(5.1 per cent) has come on the back of states’ mild fiscal slippage to 3.1 per cent of GDP,”  she said.

“Although the risk of competitive populism has abated at central level – reflecting improving intersection of politics and economics implies, there have been few relief and focussed measures for the rural/farm/welfare sector and also continued focus on infra and green energy. Increased focussed on innovation and R&D with Rs 1 trillion plus will also improve economic capacities and productivity,” Arora said.

There were no any major announcements for tax mobilisation and rationalisation, as expected. That said, the gross tax/GDP ratio will likely rise to highs of 11.7 per cent in FY25BE despite easing tax growth. Meanwhile the quality of fiscal consolidation further enhances as the capex/revex mix improve, with capex/GDP projected at 3.4 per cent. Lower net borrowings will also reduce pressure across the corporate cost curve and lead to tangible economic benefits, she added.