Budget expected to see a mild increase in Capex: Emkay

The upcoming Budget will still set the stage for policy choices ahead, and will be watched for pace of fiscal consolidation and policy priorities on capex and non-capex spend says Emkay Union Budget preview.

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The fiscal buffer from the Reserve Bank of India’s (RBI) excess dividend, amounting to 0.4 per cent of GDP, is likely to be disproportionately allocated towards the rural, farm, and welfare sectors, with a slight increase in capex.

The Gross Fiscal Deficit (GFD) for FY25 is estimated at 5.1 per cent of GDP, following 5.6 per cent in FY24. The Centre is unlikely to deviate from its fiscal consolidation path, maintaining a focus on stronger revenue mobilization and spending efficiency, despite higher revex spending.

It is projected that ex-interest revenue expenditure (revex) will rise to 7.7 per cent of GDP, and capex/GDP may increase to 3.5 per cent. Allocation towards welfare, rural development, housing loan interest subsidies, and MSMEs may be increased.

The fiscal consolidation path is facilitated by factors such as the RBI’s excess dividend, rolled-over cash balances from last year’s fiscal savings, and a better tax profile.