Balancing Act: Capital Spending and Tax Relief in Upcoming Budget

The government should aim for Rs 11 lakh crore in capital spending for the next fiscal budget while providing inflation-adjusted tax reliefs to boost consumer spending. Capital spending has been trailing expectations, and realistic goals with prudent borrowing are advised to avoid increasing yields and fiscal deficits.

The government is advised to target a capital expenditure of Rs 11 lakh crore in the upcoming fiscal budget, according to a recent statement by rating agency ICRA. The agency also calls for inflation-adjusted relief for personal income tax to stimulate consumer spending.

ICRA Chief Economist Aditi Nayar highlighted that last year's capital expenditure target was likely to fall short by Rs 1.4 lakh crore. For the next fiscal year, the budget should aim for the previous year's level, ensuring borrowing remains within reasonable limits to manage yields.

Nayar also discussed the broader economic implications, noting GDP growth prospects and the impact of the fiscal policy on urban and rural consumption. The upcoming budget may make adjustments to tax slabs, providing relief without significantly affecting revenue.

(With inputs from agencies.)