NEW DELHI: The Centre’ capital expenditure growth may slow down to 12% in FY25 from 37.4% pegged in Budget for FY24, India Ratings and Research (Ind-Ra) said in a report. This is mainly due to the pickup in private capex in few sectors, the forthcoming elections in April and the fiscal consolidation target of 4.5% by FY26, it said.
The agency also sees FY25 gross market borrowing to marginally decline to Rs 15.1 trillion from 15.4 trillion in FY24 BE, and net market borrowing to fall to Rs 11.4 trillion from Rs 11.8 trillion
According to rating agency, the Centre’s net tax revenue buoyancy is expected to come in at 1.2 in FY25, sharply lower than 1.9 projected in the current fiscal year. This will translate into a net-tax revenue growth rate of 12.6% in FY25, said Ind-Ra.
Net tax revenue represents the tax revenue of the Centre post refunds and devolution to states. In the current year, net tax collections have grown 17.2% in April-November, higher than the 11.1% growth pegged in the Budget.
The net tax buoyancy stands at 1.7 in H1 of FY24, against the Budgeted 1.1. “Increased compliance in combination with expansion of formalisation of the economy has resulted in higher tax collection growth in FY24,” Ind-Ra said.
The ratings agency expects non-tax revenue growth to be subdued in FY25 at 2.0%, mainly due to the strong growth in FY24 led by the dividend paid by the Reserve Bank of India (RBI). Non-tax revenue majorly consists of dividends by public sector banks, RBI and central public sector enterprises. In FY24, the RBI paid Rs 87,416 crore in dividend to the government.
Ind-Ra sees the Budget pegging fiscal deficit at 5.3% in FY25. “The union government has committed to reduce the fiscal deficit to 4.5% of GDP by FY26. Even if the fiscal deficit in FY24 is maintained at 5.9%, the government will have to make a fiscal adjustment of 140bp of GDP in two years, that is FY25 and FY26, to reach 4.5% by FY26,” Ind-Ra said.
Source: The Financial Express
