SBI Research has urged the Government to strike the right balance between fiscal consolidation and promoting growth and recommended that fiscal deficit be brought down at the most to 4.9 per cent for FY25. This is against the 5.1 per cent target specified in the Interim Budget.

“The Government should focus on adherence to fiscal prudence and continue on the fiscal consolidation path, but at the same time refrain from obsessing too much over the fiscal stance as it may come in the way of long-term sustainable growth path, by striking the right balance by limiting the consolidation to 20 bps (at max) this fiscal,” it noted.

In the Interim Budget presented earlier this year, fiscal deficit target was pegged at 5.1 per cent of GDP for 2024-25.

SBI Research also sees capital expenditure, which was the main plank of Centre’s growth strategy, getting bumped up to ₹ 11.8 lakh crore from ₹ 11.11 lakh crore projected in the Interim Budget.

It also expects nominal GDP growth to be pegged at 11 per cent and the tax buoyancy is expected to be 1.2-1.3 per cent with gross tax revenues growing over 13 per cent.

Marketing margins

“As the budgeted fiscal deficit gets lowered, gross market borrowing of the government will also reduce to around ₹13.5 lakh crore in FY25 compared to ₹14.1 lakh crore in the Interim Budget and net market borrowing to ₹11.1 lakh crore against ₹11.8 lakh crore earlier,” SBI Research report, authored and led by Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI, said.

This, along with India’s inclusion in Global Bond indices, will keep the yield curve movements anchored, the research report added.

For 2023-24, the government had initially set a fiscal deficit target of 5.9 per cent of GDP. This was later revised downward to 5.8 per cent.

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