23-Jan-2025, 02:18 PM
According to CareEdge Ratings, the upcoming Union Budget for FY25 is expected to maintain a strong commitment to budgetary consolidation while enhancing revenue expenditure, particularly in welfare and agricultural sectors. The agency anticipates a 6.8% increase in revenue expenditure, surpassing the previously budgeted growth of 4.6%, which translates to an additional allocation of approximately ₹750 billion compared to interim budget estimates.
Focus Areas of the Budget
The government aims to allocate more resources towards key welfare initiatives and agricultural support. Significant programs that are likely to receive increased funding include:
MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act)
PM Awas Yojana
PM Gram Sadak Yojana
PM Kisan Samman Nidhi
Initiatives targeting labor-intensive MSME sectors.
In parallel, CareEdge expects the government to uphold its capital expenditure (capex) target at ₹11.1 trillion, reflecting a 17% increase from FY24. This capex focus is crucial for stimulating economic growth and infrastructure development27. The agency notes that while public capex growth has moderated due to contractions in state and Central Public Sector Enterprises (CPSE) investments, there was a 5.2% growth in CPSE allocations in the interim budget, indicating a potential turnaround.
Revenue Growth and Fiscal Deficit
CareEdge forecasts an 11% growth in gross tax revenue for FY25, exceeding the budgeted rate of 10.6%, driven by robust direct tax collections. This increase is projected to yield an overall revenue collection surplus of about ₹1.4 trillion, which would enable the government to lower its fiscal deficit target from 5.1% to 5% of GDP16. Such fiscal prudence is essential as India seeks a sovereign rating upgrade, with agencies closely monitoring debt levels and fiscal policies.
Conclusion
In summary, CareEdge Ratings indicates that the Union Budget for FY25 will likely strike a balance between promoting economic growth through increased spending on welfare and infrastructure while adhering to fiscal consolidation principles. This dual approach aims not only to support immediate economic needs but also to strengthen long-term financial stability and resilience against future economic challenges.
