Lower nominal growth to result in minor slippage in FY24

Lower nominal GDP growth:  The budget is a few days away and there is a lot of chatter about the government meeting its fiscal deficit target.  Amidst all, the credit rating agency, CareEdge believes that despite higher expenditure and lower non-debt capital receipts, the actual fiscal deficit is anticipated to closely align with its budgeted value. 

In fact, in nominal terms, slippage is largely benign. This resilience is attributed to the robust performance of both tax and non-tax revenue streams. Nevertheless, the projection for nominal GDP growth indicates a slowdown from the budgeted 10.5 per cent YoY of the previous year to 8.9 per cent, as per the first advanced estimate. This deceleration is primarily attributed to deflation in WPI. 

Fiscal Deficit

Consequently, a slight slippage of 10 basis points, when viewed as a proportion of nominal GDP, is anticipated. This adjustment prompts a revision in our FY24 fiscal deficit projection to 6 per cent of GDP. Despite this fiscal deficit slippage, the revenue deficit is expected to decline to 2.8 per cent of GDP from the initially budgeted estimate of 2.9 per cent in FY24.