The FY25 Union Budget could prune the fiscal deficit target to 4.9% of GDP vis-à-vis the interim budget estimate of 5.1% (and from 5.6% in FY24)
Download ReportQuantEco Research || FY25 Union Budget Preview - Continuity in consolidation
The Union Budget will be unveiled by the government on Jul 23rd. This is expected to set the medium-term economic policy undertone for the new administration. We believe policy continuity will be maintained with focus on gradual withdrawal of fiscal accommodation as the post pandemic economic recovery gathers stability. FY25 Union Budget could prune the fiscal deficit target to 4.9% of GDP vis-à-vis the interim budget estimate of 5.1% (and from 5.6% in FY24). We expect market borrowing for FY25 to be lowered by Rs 600 bn (divided equally between bills and bonds) to Rs 11.65 tn. This should have a calming influence on interest rates. With the government adhering to sound fiscal management after the initial COVID induced disruption, big ticket announcements are unlikely at the moment. However, watch out for an expansion in the scope and coverage of the PLI Scheme, renewed focus on asset recycling and monetization, and perhaps a new fiscal consolidation roadmap beyond FY26.