This year, the budget had to balance numerous objectives at a time when the global situation might still be harsh. The nominal GDP growth forecast is 10.5% (down from 15.4% in FY23), leaving leeway to absorb the effects of potential reversals. The underlying growth and revenue receipts assumptions are credible.It avoided unnecessary fiscal stimulus. The Indian economy is robust. In December, the growth of the eight major economic sectors, driven by energy consumption, was 7.4%. GST collections in January 2022 were one of the highest at 1.56 lakh crore, indicating strong activity.
The Center is still committed to following the glide route to cut the budgetary deficit from 6.4% of GDP in FY23 to 5.9% of GDP in FY26. The pressure on the sovereign yield curve would also be relieved by relatively low market borrowing of Rs. 15.4 lakh crore (less than consensus projections), supporting credit demand. Because capital expenditures have higher multipliers than revenue expenditures, sustained growth will be aided by increased capital expenditures, which will include transfers and incentives to state investment projects.
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The preceding three budgets have all featured more investment spending. From 7.5 lakh crore to 10.1 lakh crore, the capex outlay grew by 33%. Effective capex is Rs 13.7 lakh crore (4.5% of GDP), which includes grants in aid to governments for capital projects. Support to states’ infrastructure programmes was increased to u20b91.3 lakh crore.
Infrastructure is still a top priority for long-term development. Initiatives to encourage municipalities and cities in Tier 2 and Tier 3 cities to raise money through municipal bonds with ringfenced funds for urban development have the potential to create a significant financing source. Efforts to improve MSMEs’ access to creditu2014the engine supporting India’s growth and jobs over the next ten yearsu2014continue in addition to huge projects. The 9,000 crore allocated is anticipated to trigger $2 lakh crore in extra loan flows.
By encouraging private sector investment, this budget aims to foster the conditions necessary for India’s economy to achieve the $7 trillion mark by 2030. Significant institutional changes, input market rationalisation, R&D expenditures in priority areas, and dissemination of digital public goods infrastructure to reach the last mile are needed to complement budgetary initiatives.
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