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Interim Budget 2024: Insights into Indian Economy, Fiscal Consolidation, and Policy Priorities

The forthcoming interim budget for 2024 is anticipated to provide insight into the pace of fiscal consolidation and policy priorities for the Indian economy. According to analysts at brokerage firm Emkay, the budget is not expected to bring about major announcements but will still serve as an important policy signaling tool. The focus is likely to center around fiscal consolidation, capital expenditure (capex), and non-capex spending priorities. Emkay predicts a few relief measures for the rural, farming, and welfare sectors, with an emphasis on improving the capex/revenue expenditure (revex) mix. The gross tax to gross domestic product (GDP) ratio is expected to remain stable at 11.4 percent, despite a slowdown in tax growth. The trajectory for the fiscal outlook for financial year 2024-25 points towards a tightening of the gross fiscal deficit to GDP ratio, indicating net and gross borrowing at approximately Rs 11.5 lakh crore and Rs 15.2 lakh crore, respectively.

The opinion on the topic is that while the interim budget may not bring groundbreaking proposals or new fiscal measures, it still plays a crucial role in setting the tone for future policy choices. The delicate balance between fostering economic recovery and managing limited fiscal space amidst challenging debt dynamics is a key consideration. The focus on capital expenditure, particularly in sectors like roads, railways, housing, and rural/urban infrastructure, is seen as a positive indication. However, caution is advised against overly populist measures given the prevailing fiscal constraints and the interim nature of the budget.

Overall, the interim budget is expected to offer insights into the government’s fiscal priorities and consolidation efforts for the upcoming financial year. It is an important tool for signaling future policy directions and will provide a glimpse into the government’s strategies for managing the economic challenges facing the country. As the budget unfolds, it will be closely watched by analysts and stakeholders for the signals it sends about the government’s economic priorities and its approach to managing fiscal constraints.

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