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The announcement of the interim budget for fiscal year (FY) 2024–25 by Union Finance Minister Nirmala Sitharaman reflected the ruling BJP's mood for the 2024 Lok Sabha elections, S&P Global Market Intelligence said in a report on Thursday.

Different from the run-up to the 2019 Lok Sabha elections, today's interim budget announcement indicated high political confidence in the BJP's tone, with multiple references underscoring policy continuity and expansion for the post-election budget announcement in July 2024, it said.

The budget speech was framed as a report card on government performance, with particular emphasis on social welfare expansion and infrastructure development. Despite the modest amount of voter-friendly spending ahead of the general elections, the government has signaled its continuous focus on capital investment and infrastructure spending with a goal to crowd in private investment, sustain high economic growth, and improve India’s competitiveness, the report said.

Although the Finance Minister highlighted an increase in actual capital expenditure outlay by 11 per cent, this is well below the capital spending growth target of 33 per cent in the FY 2023–24 budget. This would nonetheless keep the government’s infrastructure investment agenda rolling and, if realized, bring the capital investment share in GDP to a record 3.4 per cent.

However, the contribution of fixed investment to GDP growth in the financial year starting April 2024 is unlikely to rise meaningfully. Combined with another round of rising food prices, still high interest rates and lingering external risks, this would lead to a milder real GDP growth, which S&P Global Market Intelligence now projects at 6.3 per cent for FY2024–25, it added.

With respect to fiscal consolidation, the Central government is aiming to bring its fiscal deficit down to 5.1 per cent of GDP from the revised estimate of 5.8 per cent of GDP in FY 2023–24. This is an aggressive target, considering a likely slowdown in overall growth and the difficulty in meeting government's disinvestment targets. At this point, this is more of a signal that the government remains committed to reducing its budget deficit in line with its medium-term fiscal consolidation plan, with the actual fiscal deficit target likely to be revised in the final budget after the elections, the report noted.

The references in today’s budget to continue development under Prime Minister Gati Shakti is risk-positive. Continued development of railway and port corridors, and high traffic density corridors will be crucial as the government aims to increase India’s participation in global supply chains and to develop new trade routes globally. Improving intermodal connectivity and bringing cost-competitiveness in logistics to below 10 per cent of GDP will facilitate India’s efforts, it said.