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One of the key features of the Union Budget is its emphasis on accelerating the pace of fiscal consolidation. With a significantly lower fiscal deficit to GDP ratio of 4.9% in 2024-25, GoI’s gross and net borrowings would be lower as compared to what was implied in the interim budget, creating room for lower interest rates and stimulating private investment.
In the context of supporting employment, Union Budget 2024-25 proposes relevant steps towards developing an employment-linked incentive scheme. Additional incentives are also being provided to facilitate higher participation by women in the workforce. The Budget has also co-opted the private sector in the growth and employment augmentation initiatives by providing internship opportunities, which will be partially funded by GoI and partially by the top 500 companies through their CSR funds. These incentives will supplement the employment generation linked to GoI’s large capital spending.
A key consideration relates to government’s capacity (central and state) to effectively undertake investment expenditures at least up to the budgeted levels. In GoI’s case, there was an underspending compared to the budgeted amounts in 2022-23 and 2023-24. Additionally, in 2023-24 and 2024-25, GoI extended a long-term interest free loan facility to the states amounting to INR1.3 lakh crore and INR1.5 lakh crore. The offtake of these amounts by the states was partial in 2023-24 and this trend may continue in 2024-25 since the amounts would be available for spending only in the post-monsoon months.
Given that public investment expenditure has been one of the key drivers of India’s growth, the GoI and the states must ensure full utilization of the amounts earmarked for capital spending to support sustained economic growth.