India’s New Budget: Lower Deficit and High Spending, Says Fitch Ratings
India’s new budget aims to reduce the fiscal deficit to 4.9% of GDP for 2024-25, down from 5.1% in the interim budget. Fitch Ratings notes the government’s commitment to fiscal consolidation and high public capital expenditure.
Key Points
The budget includes a large dividend from the Reserve Bank of India and maintains a capital expenditure target of Rs 11.11 lakh crore. The government plans to bring the fiscal deficit below 4.5% by 2025-26.
Details
Finance Minister Nirmala Sitharaman presented the budget, which focuses on reducing the fiscal deficit and supporting economic growth. The fiscal deficit target for 2024-25 is significantly below the 5.4% anticipated by Fitch Ratings. The government’s record of achieving budget deficit targets has improved its fiscal credibility.
Capital expenditure, or capex, is used to set up long-term physical or fixed assets. The capital expenditure spending target for 2024-25 remains high at Rs 11.11 lakh crore, in line with recent trends.
Doubts Revealed
Budget -: A budget is a plan that shows how much money a government expects to earn and how it plans to spend that money.
Fiscal Deficit -: Fiscal deficit is when the government spends more money than it earns. It is like when you spend more pocket money than you get.
GDP -: GDP stands for Gross Domestic Product. It is the total value of all goods and services produced in a country in a year.
Fitch Ratings -: Fitch Ratings is a company that gives opinions on how safe it is to lend money to different countries and companies.
Fiscal Consolidation -: Fiscal consolidation means the government is trying to reduce its debt and spend money more wisely.
Public Capital Expenditure -: Public capital expenditure is money the government spends on big projects like building roads, schools, and hospitals.
Dividend -: A dividend is a sum of money paid regularly by a company to its shareholders. In this case, the Reserve Bank of India is giving money to the government.
Reserve Bank of India -: The Reserve Bank of India (RBI) is the central bank of India. It manages the country’s money and financial system.
Rs 11.11 lakh crore -: Rs 11.11 lakh crore is a very large amount of money. One lakh crore is 1 trillion rupees, so this is 11.11 trillion rupees.