The government’s interim budget for FY25 signals policy continuity by sticking to fiscal rectitude, thrust on maximizing bang for the buck via prioritization of hard capex, housing and digital penetration.
Download ReportQuantEco Research || FY25 Interim Budget - Fostering Growth via Frugality
The central government’s interim budget for FY25 signals policy continuity by sticking to fiscal rectitude, thrust on maximizing bang for the buck via prioritization of hard capex, housing and digital penetration. Lowering the fiscal deficit target by 70 bps to 5.1% of GDP in FY25 strengthens government’s commitment for preserving macro-financial stability, while being prudent enough to ensure that the gradual tapering of fiscal accommodation in the post pandemic phase does not result in any economic withdrawal symptoms. From market perspective, focus on maintaining superior quality of spending (which continues to favor a high growth multiplier) along with better-than-expected fiscal consolidation is a welcome move. The gross borrowing target of Rs 14.13 tn is lower than market expectation of Rs 15-16 tn (although it’s close to our expectation of Rs 14.5 tn). With FY25 likely to see support from an anticipated pivot in monetary policy across key economies and with India’s inclusion in EM bond index, we expect 10Y g-sec yield to drift lower towards 6.50% levels by Mar-25.