Budget 2024: How it Affects the Fiscal Deficit and value of financial assets?

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Budget 2024: How it Affects the Fiscal Deficit and value of financial assets?
  • By Meenakshi
  • 16th January, 2024
  • Banking

In an eagerly anticipated parliamentary session on February 1, Finance Minister Nirmala Sitharaman is all set to reveal the fiscal roadmap for the year 2024-25. This marks her sixth consecutive year spearheading this critical initiative under the Modi-government. Given the impending Lok Sabha elections, she will be presenting the interim Budget—a customary move during election years to manage expenses until the new government assumes control.

Budget Dynamics: Impact on All Fronts 📊💸

While the Budget caters to diverse demographics, from the common man to business entities, employees, and women, a paramount focus lies on a financial metric known as the ‘fiscal deficit.’

Decoding Fiscal Deficit: A Key Indicator 🔍💡

Embedded in the Finance Minister’s Budget speech, the fiscal deficit denotes a shortfall in the government’s income compared to its expenditures. It serves as a crucial gauge, reflecting the difference between total revenue and government outlay, providing insights into the government’s borrowing needs.

Origins of Fiscal Deficit: Revenue Shortfall and Capital Surges 💰📈

Typically, fiscal deficits arise from revenue shortfalls or a significant uptick in capital expenditure. Capital expenditure, earmarked for creating enduring assets like factories and buildings, significantly contributes to this fiscal imbalance. Financing these deficits often involves borrowing from the central bank or raising funds from capital markets through instruments such as treasury bills and bonds.

The Ripple Effect: Controlling Fiscal Deficit for Economic Growth 🌱💹

An escalation in the fiscal deficit amplifies government borrowings, leading to increased interest payments. Hence, controlling the fiscal deficit becomes imperative for fostering sustainable economic growth.

Visionary Targets: Navigating Fiscal Challenges 🎯📉

Expressing confidence, the central government aims to achieve the FY24 fiscal deficit target of 5.9% of the GDP. A commitment to further reduce it to 4.5% of GDP by FY26 underscores their fiscal prudence.

Fiscal Projections: Insights into Government Borrowings 💵📆

To bridge the fiscal deficit in 2023-24, estimated net market borrowings from dated securities stand at Rs 11.8 lakh crore. Additional financing is anticipated from small savings and other sources. Gross market borrowings are pegged at Rs 15.4 lakh crore, with total receipts, excluding borrowings, and expenditures estimated at Rs 27.2 lakh crore and Rs 45 lakh crore, respectively. Net tax receipts are expected to amount to Rs 23.3 lakh crore.

Revised Estimates: Navigating Fiscal Realities 🔄📊

In Revised Estimates 2023-24, the Finance Minister reports total receipts, excluding borrowings, at Rs 24.3 lakh crore, with net tax receipts standing at Rs 20.9 lakh crore. Revised Estimates for total expenditure are Rs 41.9 lakh crore, with capital expenditure around Rs 7.3 lakh crore. The fiscal deficit in RE 2022-23 aligns with the Budget Estimate at 6.4% of GDP.

Financial Milestones: Disinvestment and Fiscal Traction 📈💰

To date in the current fiscal, the government has garnered about Rs 10,050 crore through disinvestment in various Central Public Sector Enterprises (CPSEs), as disclosed by Minister of State for Finance Bhagwat Karad in the Lok Sabha. Notably, India’s fiscal deficit for the first seven months of the financial year, concluding on March 31, 2024, reached Rs 8.04 trillion, representing 45% of the annual estimate. Karad emphasizes the government’s achievement of only Rs 100.5 billion from selling stakes in government-run firms as of December 13, falling short of the full-year target of Rs 510 billion. 📉📆

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