Budget announcements demonstrate faith in the stability of the administration

Budget announcements demonstrate faith in the stability of the administration

Budget announcements demonstrate faith in the stability of the administration

In an election year, the Finance Minister made the wise decision to pursue budgetary consolidation, which is a very strong stance. Even while the Vote on Account mostly follows the custom of operating in cruise control, it has made some audacious declarations of purpose, and the outcome has enough to cheer about.

The Minister of Finance is demonstrating a strong commitment to staying on the road of budgetary reduction

For bankers, nothing makes them happier than when the government declares it will either cut down on borrowing or refrain from taking on new debt. Phrases like "staying on the fiscal consolidation path" are the cherry on top. Bankers have not heard such words since the outbreak.

For this reason, bankers were delighted when Finance Minister Nirmala Sitharaman reaffirmed this in her budget statement. Given the evolving domestic and international macroeconomic realities, the Finance Minister has appropriately opted for fiscal consolidation, which is a fairly strong stance to adopt in an election year even if it may not be a daring one.

financial restraint

Rating agencies and international investors will take a positive view of the Finance Minister's resolute commitment to maintaining the road of budgetary reduction. Their goal of reducing the budget deficit to 5.1% of GDP for FY2015 is very positive and promising for the global investment community, since it is below the widely held estimates of 5.2% to 5.4%.

The 5.9 percent forecast of the budget deficit for FY24 has been revised down to 5.8 percent. He intends to lower the budget deficit gap to less than 4.5% by the end of the fiscal year in March 2026 as part of his government's efforts to achieve fiscal consolidation.

Reduced public borrowing: sweetness prior to the introduction of bonds

The government has decided to borrow a gross amount of Rs 14.13 lakh crore for the fiscal year that begins on April 1. This amount is less than the larger projection of Rs 15.5-15.6 lakh crore, which is Rs 15.43 lakh crore for the current fiscal year. Bond markets will show their gratitude by lowering rates as the borrowing program develops over the course of the year.

This implies that borrowing by the government won't lower borrowing for private investment, in terms of availability and affordability. This will support the encouragement of private investment.

Remember that additional spending on reforms like the massive Rs 1.3 lakh crore allocated for state-specific 50-year interest-free loans, on top of spending over Rs 11 lakh crore, would still allow the deficit objective to be met. is not required. Regarding the construction of the physical infrastructure needed to achieve socioeconomic goals.

No adjustments to tax rates

It is commendable to resist the urge to lower some personal tax rates during an election year. Any significant announcement or change, in my opinion, is bad. No news is sometimes good news, as they say. Maybe it's the self-assurance to act consistently!

Even if the Vote on Account mostly adhered to the custom of operating essentially in cruise control without proposing any significant changes, it has made some audacious declarations of purpose, and the result has sufficient justification.

KVS Manian works as a director for Kotak Mahindra Bank full-time. The column's views are the author's own, and neither the organization nor the Kotak Group necessarily agree with them. The opinions expressed may not reflect the position of this publication.