India's Budget may raise revenue expenditure estimate for FY25

Chennai: In order to spend more on rural schemes, the government is expected to increase revenue expenditure estimate for FY25 by about Rs 750 billion over the interim budget estimate. However, it may retain the capital expenditure estimate, finds Care Ratings.

The revenue expenditure of FY25 is likely to be Rs 37.3 trillion, about Rs 750 billion higher than the interim budget’s estimate. Thus, revenue expenditure may grow by 6.8 per cent in FY25, higher than the 4.6 per cent growth budgeted in the interim budget.

Private consumption growth remained subdued, rising by only 4 per cent in FY24. This was the slowest rate in the last two decades, excluding the contraction during the pandemic year of FY21. Amid weather-related vagaries impacting agricultural output last year, supporting rural demand via higher allocation for revenue expenditure would be crucial.

As a support to the bottom of the income pyramid, especially in the rural sector, the government is expected to focus on welfare schemes with higher allocation towards agriculture, job creation, rural housing, and other labour intensive industries, mainly in the MSME segment. Among major schemes, a higher allocation is plausible for MNREGA, PM Awas Yojana, PM Gram Sadak Yojana, and PM Kisan Samman Nidhi, finds Care Ratings. PLI allocation for labour-intensive sectors like textiles, leather footwear and toys can be enhanced along with the inclusion of additional sectors.

However, the government may retain its capital expenditure estimate of Rs 11.1 trillion given in the interim budget. Interim budget has already accounted for a 17 per cent increase in the capital expenditure compared to FY24. Over the past couple of years, the government has fallen short of its initial estimates of capex targets. The government will likely focus on achieving the existing target rather than increasing it further.