The interim budget will be minimalistic in nature and would restrict itself predominantly towards taking care of necessary administrative expenses until Q1 FY25.

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Jan 20, 2024

QuantEco Research || FY25 Interim Budget Preview - Prioritizing macro stability

After maintaining fiscal deficit at 5.9% of GDP in FY24, we expect the FM to tighten headline fiscal deficit by 60 bps, to 5.3% in FY25. The incremental compression in fiscal deficit is expected to be led by revenue expenditure. We expect policy continuity to get underscored in the form of continued thrust on capex and prioritization of spending towards poor, women, youth, and farmers. 


For FY25, we estimate the government to announce net g-sec borrowing target of Rs 10.95 tn (financing 63% of the fiscal deficit) – i.e., similar to current year’s net g-sec borrowing plan of Rs 11.03 tn. Despite elevated supply pressure, expected pivot on monetary and liquidity policy later in the year along with India’s inclusion in EM bond indices would help to support bond market sentiment. We expect 10Y g-sec yield to trade in the 6.50-6.75% range by Mar-25.