Budget 2024: Centre should try to adhere to the fiscal deficit target

The upcoming Budget will be an interim budget since this year being the election year. Normally, we do not expect any path breaking policy announcements in an interim budget. But there is always scope for unconventional moves.

From the debt market perspective, the Centre is on course to meet the current fiscal’s (FY24) deficit target of 5.9% on higher GST/ direct tax mop up. But any extra spending for popularity due to political compulsions will make it tough to meet the target of 5.3% next fiscal (FY25).

The issue of demand-supply mismatch of Central and state government bonds is not in focus now. The Centre aims to borrow a gross Rs 15.43 lakh crore through the sale of bonds in FY24. Net borrowing is pegged at Rs 11.81 lakh crore.

In my view, the Centre should try to adhere to the fiscal deficit target as it gives a clear signal to global investors. The G-Sec is getting listed on global indices now. The government might announce popular measures before the general election. Although the supply looks similar to last year’s, demand is also strong.

(The writer is CIO, Fixed Income at LIC Mutual Fund Asset Management Ltd)