Budget likely to revise FY25 nominal GDP growth target upwards

Anticipating better economic expansion, the finance ministry is likely to increase its nominal gross domestic product (GDP) growth target for FY25 in the upcoming Budget from its assumption of 10.5 per cent in the Interim Budget, in February.

- DEV CHATTERJEE

"The nominal GDP growth assumption for FY25 may be revised upwards on higher growth expectations. It is likely to be 10.5-11 per cent," a senior government official said.

Nominal GDP, calculated at current market prices, factors in the effect of inflation and is used as the base to calculate crucial macroeconomic indicators, such as tax buoyancy, fiscal deficit, revenue deficit, and debt-to-GDP ratio. A higher nominal GDP assumption makes it easier for the finance minister to show a narrower fiscal deficit print and vice versa. A Business Standard analysis shows in the past 10 years, the Budget had overestimated nominal GDP growth seven times and underestimated it thrice.

In FY20, the final Budget revised the nominal GDP growth target to 12 per cent from 11.5 per cent assumed in the interim Budget.

However, for FY15, despite a change in government, the finance ministry kept the nominal GDP growth rate unchanged at 13.4 per cent.