Budget 2024 | Fiscal deficit, nominal GDP, capex: Here's what top brokerages estimate

For market participants, all eyes are on the capex numbers. In FY24, the government had announced a major boost to capital investment outlay by 33 percent to Rs 10 lakh crore.

The government may set the fiscal deficit target for 2024-25 in the 5.2 - 5.5 percent range, according to estimates shared by top foreign and domestic broking firms. Moneycontrol's own estimate of 5.3 percent comes closer to the lower end of this range.

Fiscal deficit is the amount by which total expenses of the government exceeded its total earnings. A lower number theoretically means that the economy is doing better. Jefferies and Morgan Stanley estimate the FY25 fiscal deficit at 5.2 percent, while Nirmal Bang, BoB Capital Markets see it higher at 5.5 percent.

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"We expect fiscal consolidation in FY25 with deficit likely at 5.5 percent of the GDP, largely driven by moderation in government capex growth at 15 percent. We are penciling in gross borrowings of Rs 15.2 lakh crore and net borrowing of Rs 11.6 lakh crore," analysts at Nirmal Bang said in a note.

When it comes to the FY24 fiscal deficit, most brokerages expect the government to meet its budgeted target of 5.9 percent, except for Nirmal Bang. The firm sees some slippages and has pegged the number at 6.1 percent.

Nominal GDP growth

The brokerage estimates lie anywhere between 10 percent and 11.5 percent.

Elara has the highest estimate on the Street of 11.5 percent. "We estimate 11.5 percent nominal GDP growth and anticipate the government to commit to the fiscal consolidation glide path of achieving 4.5 percent fiscal deficit by FY26," Elara analysts noted.

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Nominal GDP growth has come off sharply from 16.1 percent in 2022-23 and 18.4 percent in 2021-22 when inflation escalated and a favourable base effect played.

Nomura has pegged FY25 nominal GDP number at 10.5 percent, up from an advance estimate of 8.9 percent in FY24.

Capex

For market participants, all eyes are on the capex numbers. In FY24, the government had announced a major boost to capital investment outlay by 33 percent to Rs 10 lakh crore.

For FY25, however, the estimate lies between Rs 10.76 lakh crore and Rs 12 lakh crore, indicating a jump of 7.6-20 percent on-year.

Also Read: Union Budget 2024 | Jefferies says capex growth to slow down, will disappoint market

Foreign broking firm Jefferies has the lowest estimate on the Street. "The central government capex has tripled over the last five years. The FY25 growth could be limited to 7-8 percent, as fiscal consolidation takes a toll. This low number might disappoint the market, and stocks exposed to the government capex programme may see some correction. We recently cut L&T to neutral in our model portfolio," Jefferies has noted.

That said, capex focus is expected to continue on developing the country’s public infrastructure such as roads, water, metro, railways, defence, digital infrastructure, and green technologies.

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