Ritik Gupta
The forthcoming Budget, scheduled to be submitted on February 1, carries extreme importance in the aftermath of the COVID-19 pandemic which hindered economic development with adverse effects for health, income imbalance, job prospects, and overall sentiment.
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As per the economists at YES Bank, India’s FY22 Budget is anticipated to be advancement supportive. The country’s FY21 annual real GDP reduction is projected to be at 7.7 per cent – the lowest rise in India’s history.
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“Sectors like rural and urban infrastructure, housing, agriculture, domestic manufacturing, hospitality, tourism and aviation are likely to be the key focus areas along with a strong thrust on – MSMEs, start-ups and education. Heath and R&D related spending is expected to see a boost to align India with its global peers and to adapt to ongoing changes in global health conditions,” YES Bank report noted.
Despite India’s ballooning fiscal deficit, the bank expects a strong fiscal push led by assumptions around divestment of public sector undertakings, increased revenue from excise and customs duty, and revenue flow from 5G spectrum auction – the timing of which remains uncertain.
“Our assumption of nominal GDP growth for FY22 is 13.5 per cent after a contraction of 4.2 per cent in FY21,” it said.
The report pegged FY21 fiscal deficit at Rs 14.5 lakh crore, or 7.5 per cent of GDP, determining nominal GDP growth of minus 4.2 per cent in FY21. On the back of the anticipated economic comeback in FY22, it projected the FY22 fiscal deficit at Rs 11.5 lakh crore or 5.2 per cent of GDP (nominal GDP: 13.5 per cent).
With states, fiscal deficit probable at 4.5 per cent of GDP in FY21 and 4 per cent of GDP in FY22, the bank predicts the Centre and state fiscal deficit to be at 12 per cent of GDP in FY21 and 9.2 per cent of GDP in FY22.
As per the report, the government may hold to its FY21 gross market borrowing target of Rs 13.1 lakh crore (Rs 10.3 lakh crore has been done so far). For FY22, it foresees 70 per cent of the fiscal deficit of Rs 8.1 lakh crore to be financed by market borrowings. With redemptions at Rs 2.7 lakh crore, gross market borrowing is anticipated to be at Rs 10.8 lakh crore.
