March 21, 2023

The FY24 budget could grow by 10% to 12%, making fiscal consolidation difficult.

The upcoming Union Budget is expected to increase by 10% to 12%, and fiscal consolidation will be difficult.

Following an examination of the major economic events of the previous year, here is a summary of the upcoming Budget outlook:

Budget for Expenditures

The revised estimates for FY23 expenditure will reflect the pressure of higher subsidies, but the FY24 budget is expected to be cleaner.
Even so, we can expect the FY24 budget to increase by 10% to 12% over FY23, to around Rs 43 lakh crore-plus, but not exceeding Rs 45 lakh crore. Higher interest payments on government borrowings and increased capital spending are likely to remain the two single-largest spend items in the new budget.

J&K commence exercise for Budget 2022-23, find details inside
fy24 Budget

The fiscal deficit:

The fiscal deficit is expected to stay within the 6.4 percent Budget target for this fiscal year. Depending on how quickly and how much the government wants to consolidate, the government could allow the deficit to fall below 6% after a three-year gap, to 5.8-5.9 percent levels in FY24.
However, meeting the fiscal glide path of less than 4.5 percent by FY26 may still be difficult.

Capital expenditures by the government

Both at the state and federal levels, there will be a continued emphasis on infrastructure development and capital expenditure, and the government is expected to increase these expenditures in the upcoming Budget. In the new Budget, a new capex target of Rs 8-9 lakh crore could be set.

Disinvestment profits

Disinvestment has been gradual. In comparison to the Rs 65,000 crore divestment target, receipts are expected to be less than Rs 50,000 crore, including the Rs 20,000 crore received by the government since the LIC listing.

With the IDBI Bank and Shipping Corp transactions likely to close, the FY24 divestment target could be raised to between Rs 75,000 and Rs 80,000 crore.


The allocation under the Mahatma Gandhi National Rural Employment Guarantee Act of 2005 (MNREGA) is based on demand. While the MNREGA allocation has remained constant year on year, an additional Rs 16,000 crore has been provided during the fiscal year. This is in contrast to the Rs 20,000 crore requested by the rural development ministry. Because the scheme is demand-driven, a significant increase in the FY24 budget is unlikely.

Food assistance

By plugging the Pradhan Mantri Garib Kalyan Anna Yojana, the Centre has also cleaned up the food subsidy (PMGKAY). Food subsidies may be restored to Rs 2 lakh crore levels in the FY24 Budget.
The government will spend only Rs 14,000 crore more on the free food grains programme, which is already included in the Rs 2 lakh crore budget.

Subsidized fertiliser

Fertilizer subsidies are also likely to be reduced as global gas and fertiliser prices fall. The FY24 Budget may provide Rs 1.20 lakh crore to Rs 1.30 lakh crore for the same, a significant reduction from the Rs 2.15 lakh crore likely revised estimates for FY23.

Petroleum subvention

Petroleum subsidies have more than quadrupled this fiscal year due to payments to OMCs for LPG losses. While the government has made up for the LPG losses, the OMCs are still expecting additional cash compensation for the petrol and diesel losses. Petroleum subsidies could be a point to watch in the upcoming Budget, though according to the results announced on January 30, BPCL made a profit during the October-December quarter after losing the previous quarter.

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