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Budget 2025: Government likely to curtail FY2025 fiscal deficit at 4.9%-5%, says  Icra

Posted on 5 July 20246 July 2024 by Pradeep Jayan

Rating agency ICRA estimates the Government’s revenue receipts to witness an upward revision of Rs. 1.2 trillion in the upcoming union budget.

Also, the government is likely to peg a relatively shallower increase in the revenue expenditure (revex) target, largely focused on the rural economy, the agency said in a release.

“The GoI is likely to set a fiscal deficit target at 4.9-5.0% for FY2025, vis-à-vis the IBE of 5.1% of GDP, without compromising the capital expenditure target of Rs. 11.1 trillion,” the agency said in a note.

Consequently, ICRA believes that there is a high likelihood of reducing the net market borrowings for FY2025 by Rs. 350-550 billion vis-à-vis the IBE of Rs. 11.8 trillion, which would augur well for yields, along with the demand boost for Government securities (G-secs) owing to their inclusion in the J.P. Morgan Government Bond Index.

ICRA’s analysis suggests that incremental fiscal consolidation will be challenging over the next 3-4 years. Moreover, the extent of off-budget capex ‘on-budgeted’ during FY2022-24 must be considered while assessing the end-point of the fresh medium-term fiscal glide path beyond FY2026.”

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