Balancing Numbers

THE UNION BUDGET for FY24 was a special one coming as it did before the General Elections in 2024.

- Madan Sabnavis

The budget has been drafted keeping in mind the primary goal of attainment of the fiscal deficit ratio of 4.5 per cent by FY26. To this end, the starting point has been reduction in fiscal deficit ratio by 0.5 per cent to 5.9 per cent for the forthcoming year. This will mean a deficit of Rs 17.86 lakh crore, which is almost the same as that of last year (Rs 17.55 lakh crore).

The net borrowing of the government at Rs 11.8 lakh crore will ensure that there is no undue pressure on liquidity in the system. This is important today as there is a tendency for liquidity in the system being compressed presently and the markets were closely watching this number with interest. The fact that the bond yields came down post budget announcement vindicates the fact that the fiscal arithmetic has gone down well with the market.

How has this been achieved? On the revenue side the budget assumes GDP growth of 10.5 per cent which also gets reflected in growth of both direct and indirect taxes. Therefore, in a way, the budget has been conservative with revenue projections. This makes sense in these uncertain times. There can hence be a surprise if things work out better. While doing this, relief has been provided to the income tax payers with the new scheme being made more attractive. There has not been any change in the corporate tax structure though for new companies some incentives have been provided. Therefore, the numbers look realistic.