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The government’s interim Budget 2024-25, to be presented by Finance Minister Nirmala Sitharaman on February 1, just ahead of the Lok Sabha polls, is expected to see a continuation of the stepped-up government investment in big-ticket infrastructure projects to spur economic growth while keeping the fiscal deficit in check.

There will also be increased outlays in the budget on social welfare schemes for the poor and the agricultural sector to meet the food security needs of the vulnerable sections and ensure inclusive growth.

The Finance Minister is comfortably placed on the fiscal consolidation path with tax collections in 2023-24 expected to exceed the budget estimates.

As the economy continues to grow at a brisk pace, this buoyancy in tax revenues is expected to continue in 2024-25, which will make sufficient resources available for taking up big projects in the highways, ports, railways and power sectors as well as social welfare schemes for the poor without the fiscal deficit spinning out of control.

The fiscal deficit, which reflects the amount of government borrowing required to bridge the gap between its total revenue and expenditure, was fixed at 5.9 per cent for 2023-24. The government is expected to meet this target.

Government investments in big infrastructure projects create more jobs and incomes that have a multiplier effect on the economy as demand for products such as steel and cement also goes up, which leads to more private investments and employment.

With the creation of more jobs demand for consumer goods also increases leading to an overall acceleration in the country’s economic growth rate.

To ramp up the virtuous cycle of investment and job creation the budget for 2023-24 had sharply increased the capital expenditure outlay on infrastructure projects by 37.4 per cent to a whopping Rs 10 lakh crore from Rs 7.28 lakh crore in 2022-23.

According to sources, the government plans to raise this outlay further. Although the hike in percentage terms is not expected to be as much as last year, it will be substantial to impart a big push to growth since the increase would come on a high base.

As far as the government’s social welfare schemes are concerned, an allocation of around Rs 2.4 lakh crore is expected to be made for the PM Garib Kalyan Yojana under which free foodgrain is distributed to over 80 crore poor people.

The Rs 1.25 lakh crore outlay for agriculture in 2023-24 is likely to be increased along with the substantial allocation for the subsidy on fertilisers to accelerate growth in the farm sector which has slowed down due to the erratic monsoon.

No major announcements for tax mobilisation and rationalisation are expected in the current budget, since robust tax collections are helping to underpin the fiscal consolidation path.

However, due to the significant inflation and escalating living costs for salaried individuals, the current standard deduction of Rs 50,000 is deemed inadequate. Hence, the Finance Minister may announce a concession by raising the standard deduction for the salaried class.

This would also help in placing more money in the hands of consumers to spend, which, in turn, would increase the demand for goods and spur economic growth.

Economists, including from leading global bank Barclays, expect the Central government to comfortably achieve its fiscal deficit target of 5.9 per cent of GDP for 2023-24 and expect the FY25 budget to set a deficit target of 5.3 per cent of GDP.

"We expect a fiscal deficit of Rs 17.7 lakh crore (5.3 per cent of GDP), raising central government spending to around Rs 49.1 lakh crore, up nearly 9 per cent year-on-year," it said in a report.

In the previous fiscal year (2023-24), the budget outlay was increased by 14.1 per cent, to a total of Rs 45 lakh crore.

Barclays projects tax revenue receipts to grow 15 per cent year-on-year in 2024-25, with broad-based growth across direct and indirect taxes (GST) which will enable the government to meet its increased outlays.

The government is expected to find a balance between helping the economy grow steadily and adhere to the fiscal consolidation glide path in the interim budget, senior officials said.

Fiscal discipline is important as a high fiscal deficit leads to higher inflation and more government borrowing which leaves less money in the banking system for private sector companies to take loans for investment. This in turn hurts economic growth and slows job creation.