VOTE ON CONFIDENCE

Budget steers clear of populism, reiterates govt's commitment to growth

- Gireesh Chandra Prasad, Subhash Narayan & Gulveen Aulakh

Finance minister Nirmala Sitharaman on Thursday delivered a crisp interim budget for FY25 that reiterated the government's commitment to fiscal consolidation and infrastructure-led growth. There were only a few announcements and no changes to taxes, in a sign that the Bharatiya Janata Party-led administration is confident of returning to power in polls due by May.

In her shortest budget speech yet, while Sitharaman conveyed the government's focus on four key priority sectors-women, farmers, youth and the poor - she steered clear of populism. The allocation to welfare schemes (central sector and centrally sponsored schemes combined) for the next financial year was increased by just 4.7% over the revised estimates for FY24.

Overall, the budgeted increase in government spending to ₹47.66 trillion is a mere 6.1% over the revised estimates for FY24. The overall spending on subsidies is 7% lower than the revised estimates, thanks to a 13.2% lower dole on fertilizers.

The rectitude in spending meant the fiscal deficit, or the gap between revenue receipts and spending met through borrowing, for FY25 is estimated at ₹16.85 trillion, or 5.1% of GDP. Moreover, the current financial year's fiscal deficit has been revised downwards by 10 basis points to 5.8% of GDP.

The finance minister promised that the government will continue this consolidation to bring the fiscal deficit below 4.5% of GDP by FY26. The fiscal consolidation plan is aided by an 11.5% growth in gross tax-revenue in FY25, translating to a tax buoyancy of 1.1. Tax buoyancy refers to the ratio between the rate of growth in tax collections over the economic growth rate.