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The Union Budget has pegged India’s nominal GDP at 10.5 per cent in the financial year 2024-25. Nominal GDP includes changes in prices due to inflation and presumes importance in the Budget as other numbers are calculated on this projection.
The expected GDP growth assumption for 2024-25 in the interim Budget is well above the statistics ministry’s estimate of 8.9 per cent for the current financial year.
“Nominal GDP for BE 2024-25 has been projected at Rs 3,27,71,808 crore assuming 10.5 percent growth over the estimated Nominal GDP of Rs 2,96,57,745 crore as per the First Advance Estimates of FY 2023-24,” the Budget documents said.
The nominal growth rate serves as the foundation for crucial metrics like the fiscal deficit-to-GDP ratio. Assuming a more optimistic nominal GDP growth rate, as projected by the finance ministry, implies a larger GDP in absolute terms.
Also, the revised estimate of the fiscal deficit for FY24 is 5.8 per cent of GDP, improving on the budget estimate despite a moderation in nominal growth estimates. The fiscal deficit target for FY25 has been set at 5.10 per cent of GDP.
Union Finance Minister Nirmala Sitharaman said, “The revised estimate of the fiscal deficit for FY24 is 5.8 per cent of GDP, improving on the budget estimate notwithstanding moderation in the nominal growth estimates.”
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