ICRA projects GDP to dip 6.5% YoY in Q2FY25
It said, this is due to the heavy rains and weak margins offsetting the buoyancy injected by the turnaround in Government capital expenditure and healthy trends in kharif sowing.
In the upcoming interim budget, the government is likely to follow the fiscal consolidation path and may announce a fiscal deficit target of 5.3% of the gross domestic product (GDP) for 2024-25 (FY25), said Goldman Sachs on Friday.
In a report titled ‘Asia in Focus’, Goldman Sachs also predicted a considerable deceleration in the pace of government spending on capital expenditure (capex) for the fiscal year 2025. The projection indicates a potential reduction to as much as one-third of the spending levels observed in the preceding three years.
“Government capex has aided overall investment growth in recent years, and we expect the focus on capex to continue, but at a slower pace than what has been seen in the last few years, given the medium-term fiscal consolidation path of the central government,” wrote the economists in their report.
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Notably, in the past three years, the government has consistently increased capex spending at a CAGR exceeding 30%. During this period, the budgeted capex target reached 3.3% of the GDP, marking the highest level in 18 years.
The Centre will meet its fiscal deficit target of 5.9% of the GDP as the receipts are likely to be higher than the estimates by 0.2% of the GDP, it said.
“In the current fiscal year FY24, robust tax collection, mainly driven by direct taxes, has given the government some fiscal space to carry out additional spending and yet meet the fiscal deficit target of 5.9% of GDP,” it said.
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