Concerns over GDP, spending cuts; fiscal deficit is bright spot
- The Finance Minister presented the interim Union Budget for 2024-25, focusing on achievements and providing a recap of the past decade.
Muted GDP Growth Outlook
- The nominal GDP growth rate, crucial for budget considerations, is anticipated to be 10.5% for the upcoming year.
- A sluggish nominal GDP growth poses challenges for real GDP growth, estimating a range of 6% to 6.5% for 2024-25.
Fiscal Deficit Reduction
- Fiscal deficit, representing government borrowing from the market, is a critical parameter.
- The government has successfully reduced the fiscal deficit from 9.2% of GDP in the post-COVID period to 5.8% in the current fiscal year.
Capex Target Unmet
- The government aimed for a capex target of Rs 10 lakh crore
- But revised estimates reveal it fell short at Rs 9.5 lakh crore, raising concerns about its impact on overall economic growth.
Reduction in Health and Education Spending
- Allocations for health and education, crucial for development, have been historically lower than required.
- The government has not met budgeted targets for both sectors in the current fiscal year, with actual spending falling short.
Cuts in Core Schemes
- Major government schemes, particularly those focused on marginalized sections like SCs, STs, and minorities, have experienced expenditure cuts.
- Revised Estimates for key schemes show reductions, raising questions about the government's commitment to social welfare.
Income Tax as Top Revenue Source
- Traditionally reliant on market borrowings, the government's financial resources are shifting.
- Income tax collections are projected to contribute the most (19%) to government resources in FY25, surpassing corporate tax (17%), GST (18%), and borrowings (28%).
Prelims Takeaway
- Capex
- Fiscal Deficit