Mumbai

According to a CareEdge Ratings report released on Tuesday, the Union Budget is set to prioritize support for consumption, with increased funding for the rural economy, welfare programs, and agriculture. This includes higher allocations for schemes such as the Pradhan Mantri Awas Yojana (PMAY) and the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

The report suggests that the government will continue to focus on manufacturing and capital expenditure (capex), maintaining the interim budget’s capex target while increasing the Production Linked Incentive (PLI) allocations for labor-intensive sectors like textiles, leather, footwear, and toys to promote job creation. In FY25, there has been a significant rise in allocations under major PLI schemes, especially for electronics, automobiles, and pharmaceuticals.

CareEdge Ratings anticipates that the government will keep the FY25 capex target at ₹11.1 lakh crore. Overall public capex saw a 15.1% growth in FY24, while FY25’s interim budget indicated a 5.2% increase in capex for Central Public Sector Enterprises (CPSEs), particularly in sectors like petroleum, natural gas, power, and renewable energy.

On the revenue side, an unexpected transfer from the Reserve Bank of India (RBI) could add ₹1.25 lakh crore to non-tax revenue. CareEdge expects gross tax revenue to rise by 11% in FY25, surpassing the budgeted growth of 10.6%. This could lead to an overall revenue increase of ₹1.4 lakh crore compared to interim budget estimates. Consequently, the fiscal deficit target for FY25 might be lowered to 5% of GDP, down from the interim budget’s target of 5.1%.