SBI Research Urges Modi Govt to Prioritize Fiscal Prudence in Upcoming Budget

Ahead of the 2024-25 budget presentation, SBI Research advises the government to focus on fiscal prudence and continue fiscal consolidation. The suggested fiscal deficit target is 4.9%. Positive GST revenue and higher PSU dividends may help achieve this goal, reducing market borrowing and keeping yield curves stable.

As the Modi government prepares to table its anticipated 2024-25 budget on July 23, SBI Research has recommended a focused approach on fiscal prudence and consolidation. The government's fiscal deficit target for the financial year 2025-26 aims to drop below 4.5% of GDP.

SBI Research suggests setting a fiscal deficit target of 4.9% but advises against becoming overly concerned with the fiscal stance. The fiscal deficit for 2023-24 was initially set at 5.9% of GDP and later revised to 5.8%.

The upcoming budget, expected to benefit from robust GST revenues and higher PSU dividends, may enable market borrowing reduction and a stable yield curve. This will be Finance Minister Nirmala Sitharaman's sixth budget, surpassing former Prime Minister Morarji Desai’s record.