Budget 2022 to be presented on 1st February 2022

Mumbai:

The rising uncertainty from the third wave of the pandemic will force the upcoming Budget to push the fiscal pedal more to support the delicate reforms, and print in a 6.5 per cent fiscal deficit as the government has around Rs 42 lakh crore of capital expenditure. Budget likely. The brokerage report says that the next financial year.

Budget 2022 will be presented on February 1. Budget 2021 had pegged the fiscal deficit at 6.8 per cent or Rs 12.05 lakh crore for FY12, down from 9.5 per cent in FY11, when it borrowed Rs 12 lakh crore, but rose in percentage terms. Given the economy’s massive 7.3 percent contraction in the year.

The government raised its gross market borrowing target for the fiscal year to Rs 12 lakh crore from Rs 7.8 lakh crore in February 2020, after a jump in the fiscal year 2011 deficit by the government in May 2020, when the pandemic hit all budgetary numbers. ended it.

The government is expected to continue to push on the fiscal pedal to support the economy. While the fiscal deficit may be marginally revised upwards, from 6.8 per cent in FY12 to 7.1 per cent, strong nominal GDP growth will keep the government on the deficit path announced in the current budget, said Rahul Bajoria, managing director and Chief economist Barclays India said in a note.

Accordingly, the consolidated fiscal deficit will reach 11.1 per cent of GDP in the current fiscal (7.1 per cent for the Center and 4 per cent for the states), warning that fiscal consolidation will take longer.

He said the combined fiscal deficit would gradually come down to 7 per cent of GDP over the next five years.

For FY23, he put in a consolidated deficit of 10.5 per cent of GDP, with 6.5 per cent for the Centre, marginally up from the 6.3 per cent projected in Budget 2021.

According to Bajoria, the government is projected to have a fiscal deficit of Rs 17.5 lakh crore or 6.5 per cent of GDP in FY13, which would allow it to spend more than Rs 41.8 lakh crore.

Not envisaging any rapid fiscal consolidation, he expects borrowings to remain high, with the government borrowing Rs 16 lakh crore in the next fiscal (up from Rs 12 lakh crore in this fiscal).

He attributed the high deficit to increased welfare spending and production-linked stimulus schemes, which will continue to be key fiscal priorities of the new budget.

Amid weak private investment, states are likely to cut capital expenditure (capex) in lieu of losing the protected GST compensation fund, as prioritizing capital expenditure is crucial to bolster the fragile growth revival.

Still, he expects the government to stick to providing fiscal support to the economy, adding that it is possible to complete the glide path of the medium-term deficit. In fact, he said a big fiscal push now to support growth could help the government consolidate the deficit in the coming years.

On the revenue front, Bajoria expects it to exceed budget estimates as strong modest growth propelled tax revenues through FY22 and is likely to continue in FY23.

Non-tax revenue is likely to remain in line with the budget estimates. Large revenue collection will give the government enough room to push on the expenditure pedal.

His optimism comes from the belief that despite a potentially wider deficit than originally budgeted, the government is unlikely to increase market borrowing because any incremental expenditure will be funded from higher cash balances and smaller savings funds.

The report sees a nominal GDP growth of 19.6 per cent for FY12, up from the government’s estimate of 17.4 per cent and 13.6 per cent in FY13.

Source

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