Interim Budget 2024: Government unlikely to announce big bang populist schemes, say economists

The announcement of the interim budget for 2024 is less than 10 days away and economists believe the government is unlikely to announce big bang populist schemes.

According to Samiran Chakraborty, Chief India Economist at Citi, historical trends suggest that interim budgets usually refrain from introducing entirely new schemes, except for instances like the PM Kisan scheme in 2019.

“By our estimate, if the government has to meet both the targets of reducing the fiscal deficit by a substantial amount and keeping the capex focus intact, then the scope for further increase in the populist schemes is relatively limited.

But some small tweaks can always be done, like we have estimated that if the PM Kisan scheme, amount is increased from ₹6,000 to ₹9,000 the additional burden on the exchequer is only about 0.1% of GDP.

So those kinds of small changes can happen but don't expect a big bang, populist scheme," Samiran Chakraborty stated in an interview with CNBC-TV18.

Kaushik Das, chief economist of Deutsche Bank, anticipates the government adhering to the broader fiscal deficit consolidation plan, aiming for a figure of around 5.3%.

As of the conclusion of November 2023, data from the Controller General of Accounts (CGA) reveals that the fiscal deficit of the Indian government has exceeded 50% of the full-year budget estimate (BE), reaching ₹9.06 lakh crore.

In absolute terms, the fiscal deficit, representing the difference between expenditure and revenue, amounted to ₹9,06,584 crore during the April-November period of 2023-24.

In contrast, during the corresponding period in the previous year, the deficit accounted for 58.9% of the BE for 2022-23. The government has projected a fiscal deficit of ₹17.86 lakh crore for the fiscal year 2023-24, equivalent to 5.9% of the GDP.

Soumya Kanti Ghosh, Group CEA at State Bank of India, envisions the possibility of a roadmap outlining the government's broader plans for the next few years, possibly focusing on key programs like the Prime Minister Awas Yojana.

Ghosh also anticipates positive surprises in capital expenditure, with an expected growth rate of 13% to 14%, bringing it close to 3.5% of GDP in the next fiscal year.

CNBC-TV18 had earlier reported that there is a proposal to push for a minimum 15-20% increase in capital expenditure in the upcoming interim budget. The government had initially allocated Rs 7.5 lakh crore for capex in FY23, and this was later raised to ₹10 lakh crore for FY24.

The sources indicate that a significant portion of the increased capex will be directed toward infrastructure and strategic ministries, such as the Ministry of Road Transport and Highways, the Railway Ministry, and the Defense Ministry. This initiative aims not only to stimulate growth but also to generate employment opportunities.

Chakraborty notes that the central government's tax-to-GDP ratio is nearing an all-time high despite lower GST rates, reflecting improved compliance. The real surprise, according to him, lies in non-tax revenue, with expectations of a significantly higher Reserve Bank of India (RBI) dividend and continued profits from public sector undertakings (PSUs) in FY24 potentially boosting non-tax revenue for FY25.