Sustaining the India story

The quality of expenditure continues to improve

- AKASH PRAKASH

There was a lot of interest in the Budget from global investors. How would the government react to its weaker electoral performance? Would we see a lurch towards populism as has been seen in the recent state Budgets? Would we see some new reform measures in line with the transformational change rhetoric from the government pre elections?

The finance minister has maintained her fiscally conservative stance and thankfully shows no change in economic direction. The quality of expenditure continues to improve. Capital expenditure (capex) continues to be prioritised. When we compare this Budget with the figures given in the Interim Budget of February, some trends are clear. Revenue receipts for FY25, as expected, are higher by almost 1.28 trillion over the figures presented in February 2024, but this is entirely due to higher non-tax revenues of ₹1.46 trillion [largely the Reserve Bank of India (RBI) dividend]. Net tax revenues, surprisingly, are shown lower by ₹18,000 crore (entirely due to the higher share of states by ₹27,500 crore). So how was this revenue windfall of ₹1.28 trillion planned to be spent? Revenue expenditure is budgeted to be up by ₹54,744 crore over the interim numbers despite interest payments falling by ₹27,500 crore. So revenue expenditure ex interest payments is up by ₹82,244 crore, only 3.33 per cent. The balance of the revenue windfall was used to lower the fiscal deficit by ₹72,182 crore. The fiscal deficit target was cut to 4.9 per cent of gross domestic product (GDP) from the original Interim Budget target of 5.1 per cent. So yes, there was a revenue windfall for this year but more than half of it was used to lower the deficit, rather than increase revenue expenditure. All the fear of the government turning populist has been just plain wrong.