Interim Budget 2024-25: 'Commitment to fiscal prudence and growth'

In an election year, it is heartening to see that our finance minister delivered an Interim Budget that reflects the government's steadfast commitment towards fiscal prudence and its unwavering focus on structural reforms, infrastructure development, and inclusive growth.

Fiscal prudence has been amply demonstrated through declining current account deficit, falling headline inflation, rising GST collections, and improving bad loan ratios, thus narrowing our estimated fiscal deficit to 5.8 per cent of GDP in 2023-24, and further to 5.1 per cent in 2024-25, bringing us a step closer to the government's ultimate target of 4.5 per cent by 2025-26. With all these, I am confident that India's international credit rating will be upgraded in the near future.

In fact, the gross borrowing announced was lower by Rs 1-1.2 trillion at Rs 14.13 trillion, against market expectations of Rs 15-15.4 trillion. This immediately led to a rally in long-end G-secs. Further, during this calendar year we expect FPIs to invest $30-35 billion in G-secs on account of India's inclusion in global bond indices, thus reducing the overall cost of government borrowing. New FPIs will be able to enter India's debt market at internationally competitive yields.

It is reassuring to see that the government has increased capital investment outlay for the fourth time in a row, allocating Rs 11.1 trillion, an improvement of 11.1 per cent over last year's 33 per cent increase. This, in conjunction with expected private capital expenditure, will continue the infrastructure buildout across the nation, driving economic growth and generating employment opportunities.

The three major economic railway corridor programmes – (a) energy, mineral and cement corridors, (b) port connectivity corridors, and (c) high traffic density corridors – under the PM Gati Shakti initiative will improve logistics efficiency and reduce costs to 8 per cent, as envisaged in the National Logistics Policy.

Under the Prime Minister’s leadership, our country has witnessed three consecutive years of 7 per cent-plus growth, making it the fastest growing G20 economy. India has emerged as one of the most preferred destinations for global investors.

The Budget also focused on furthering India’s commitment to Net Zero by 2070. Encouraging adoption of e-buses for public transport; strengthening e-vehicle ecosystem by supporting manufacturing and charging, phased mandatory blending of compressed biogas in compressed natural gas for transport and piped natural gas for domestic purpose are measures in the right direction. 

Kaku Nakhate is India Country Executive, Bank of America