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UPSC EDITORIAL ANALYSIS – A Budget that drives growth with stability     


Source: The Hindu

  • Prelims: Indian Economy(GDP, GVA, fiscal policy, budget, FRBM, gross fixed capital formation (GFCF), economic survey, budget, Employment etc )
  • Mains GS Paper III: Fiscal policy, Monetary policy, GDP, Issues related to planning etc.


  • The Union Budget (2024-25) will be presented by the Finance Minister in the Lok Sabha on July 23.
  • The President of India, on the recommendation of the Government has approved the proposal for summoning of both the Houses of Parliament for the Budget Session, 2024.





  • The government’s blueprint on:
    • expenditure
    • taxes it plans to levy
    • other transactions which affect the economy and lives of citizens.
  • Article 112 of the Indian Constitution: Union Budget of a year is referred to as the Annual Financial Statement (AFS).
  • The Budget Division of the Department of Economic Affairs in the Finance Ministry is the nodal body responsible for preparing the Budget.
  • Components of the Budget:
    • expenditure
    • receipts
    • deficit indicators.
  • Depending on the manner in which they are defined, there can be many classifications and indicators of expenditure, receipts and deficits.



  • Short term: Ensure a minimum 7% growth
    • Medium-term objective is to sustain the real GDP growth rate in the range of 7%-7.5%.
  • Bringing down the fiscal deficit relative to GDP from the current levels to the Fiscal Responsibility and Budget Management (FRBM) consistent level of 3% in the next three to four years.
  • Employment objective along with additional emphasis on the relatively more labor-intensive sectors in the composition of output.


Investment and savings prospects

●      To ensure a 7% plus growth on a sustained basis, a real investment rate of 35%.

●      Latest data(2023-24): The real investment rate measured as gross fixed capital formation (GFCF), as percentage of GDP, was 33.3 for 2022-23 and 33.5 for 2023-24.

○      Gross capital formation (GCF) is marginally higher

○      Ensure a level of GFCF at 35% or so in the medium-term to sustain a growth of 7% plus

●      The saving to GDP ratio in nominal and real terms were 30.2% and 32.8%, respectively, in 2022-23.

○      Marginal upward adjustments are required in the savings and investment rates to ensure reaching and sustaining a level of 35% of GDP for the GFCF.

●      Fall in household sector financial savings(2022-23) had fallen to 5.2% of Gross National Disposable Income.

○      It is critical to increase the household financial savings rate to facilitate access to investible surplus at reasonable rates for the private sector.

●      The contribution of net exports to GDP growth has remained negative or low in recent years due to subdued export prospects.

○      It was at 0.5% points in 2022-23 and (-)2.0% points in 2023-24.

●      Indian service exports are expected to continue to do better than goods exports, which contracted in 2023-24.

○      India will have to rely on government investment demand to provide support to growth.

  • Until Export demand should picks up and private investment gathers momentum


Budgetary options:

●      Controller General of Accounts (CGA): The base number for gross tax revenues (GTR) for 2023-24 at ₹34.65 lakh crore, actuals turned out to be higher than the revised estimates (RE) of the interim Budget by a margin of ₹27,581 crore.

●      A nominal GDP growth for 2024-25 to be at least 11%, made up of 7% real growth and 3.8% implicit price deflator (IPD)-based inflation.

●      The rise in the IPD-based inflation as compared to the 2023-24 level of 1.3%: It is on account of expected higher Wholesale Price Index (WPI) inflation which was (-)0.7% in 2023-24.

●      Buoyancy of 1.1 and a GTR growth of 12.1%, expect a GTR magnitude of ₹38.8 lakh crore.

○      Net tax revenue for the Centre at ₹26.4 lakh crore after providing for States’ share in central taxes

○      Higher than ₹26 lakh crore provided in the interim Budget.

  • Non-tax revenues are expected to be higher, as compared to the interim Budget estimates
    • Due to (RBI)’s augmented dividends of ₹2.11 lakh crore.
    • Centre’s non-tax revenues to exceed ₹5 lakh crore.
    • Any transfer from the RBI is going to be expansionary since it will have a liquidity effect.
  • With the interim Budget expenditure magnitudes, revenue expenditure growth in 2024-25 turns out to be 6% over the CGA actuals for 2023-24.
    • This growth may have to be increased to accommodate higher revenue expenditures on account of
      • Increased subsidies
      • Increased health expenditures
      • Increased allocations for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

Way Forward

  • Even if the revenue expenditure growth is enhanced to 8%, this would provide additional revenue expenditures close to ₹3 lakh crore over 2023-24 actuals.
    • This would leave fiscal space to provide for capital expenditure growth of 2% in 2024-25
    • It would be required for supporting investment demand resulting in infrastructure expansion that is consistent with the government’s medium-term objectives.
  • Tax rationalisation measures may be undertaken as long as they do not imply any significant revenue sacrifice.
  • Expansion of the ongoing Production Linked Incentive (PLI) scheme, particularly if it supports employment generation, may be considered.
  • The Budget needs to aim at combining growth with stability.
    • Stability includes both price stability and fiscal stability.
  • Signal commitment to the FRBM targets in the short to medium term.
  • As the fiscal deficit to GDP ratio is reduced and nominal GDP growth is kept in the range of 11%-11.5%
    • The debt GDP ratio and the interest payment to revenue receipts ratio would also come down, facilitating the reduction in fiscal deficit, thereby creating a virtuous cycle.


  1. Explain intergenerational and intragenerational issues of equity from the perspective of inclusive growth and sustainable growth.(UPSC 2020)

(200 WORDS, 10 MARKS)

Editorial Analysis – 10 July 2024 [PDF]