Economic Survey 2024: Centre, States See Improved Fiscal Balances Despite Boost In Public Investment

Economic Survey 2024: The survey highlighted gains in tax compliance driven by procedural reforms, expenditure restraint, and increasing digitisation as key factors in achieving this balance

The external balance has been under pressure due to subdued global demand for goods, but strong services exports have largely counterbalanced this, Economic Survey noted.

Source : ABPLIVE AI

Economic Survey 2024: The fiscal balances of the central and state governments have shown progressive improvement despite expansionary public investments, according to the Economic Survey 2023-24. The survey, tabled in Parliament by Finance Minister Nirmala Sitharaman on Monday, highlighted gains in tax compliance driven by procedural reforms, expenditure restraint, and increasing digitisation as key factors in achieving this balance.

The external balance has been under pressure due to subdued global demand for goods, but strong services exports have largely counterbalanced this, the survey noted. Despite the challenges, the survey mentioned that global output is now somewhat more resilient than in 2022, with shrinking inflationary pressures and an anticipated recovery in trade, provided there are no further geopolitical shocks.

However, the survey also cautioned that the likelihood of geopolitical disturbances and conflicts has increased in recent times.

The survey detailed India's calibrated response to the pandemic on the economic front, highlighting three main components. Firstly, a focus on public spending on infrastructure created strong demand for jobs and industrial output, triggering a robust private investment response. Secondly, stronger balance sheets in the financial and non-financial private sectors, supported by a decade of government and Reserve Bank of India initiatives, contributed to the economic recovery.

These developments led to an orderly recovery and expansion of the Indian economy over the past three years. The survey noted that the real GDP in FY24 was 20 per cent higher than its FY20 level, a feat achieved by only a few major economies. This sets a strong foundation for robust growth in FY25 and beyond.

"Growth has been inclusive, with reductions in unemployment and multi-dimensional poverty and an increase in labour force participation," the survey stated, adding that the Indian economy looks forward to FY25 with optimism, anticipating broad-based and inclusive growth.

The survey also addressed the challenges faced in FY23, which began with multiple issues such as domestic price pressures and a widening current account deficit (CAD) due to increased oil prices, stemming from the conflict in Europe. Central banks in several countries responded by raising policy rates to combat inflationary pressures.

Throughout FY23 and FY24, maintaining macroeconomic stability was crucial for securing economic growth amidst domestic and external vulnerabilities, the survey concluded.

Meanwhile, minister of State for Finance Pankaj Chaudhary in his reply presented the central government's fiscal deficit data for the past three years. 

As can be seen from the table above that fiscal deficit is not continuously increasing. The Fiscal Deficit in FY23-24 has declined to Rs 16,53,670 crore against Rs 17,37,755 crore in FY22-23. Further, the fiscal deficit to GDP ratio has continuously been on declining trajectory.

The minister said that the government announced a broad glide path of fiscal consolidation to attain a level of Fiscal Deficit lower than 4.5 per cent of GDP by FY 2025-26 in the Budget Speech for FY 2021-22. In addition to this, the Government has focused augmentation of receipts and prioritising the expenditure.