India
Budget expectations: India has emerged as the fastest growing major economy and is harboring plans to become the third largest in the world by 2030. India's growth and prospects on several aspects ranging from local manufacturing and export push have outshined the dull developments of the world. The Budget should thus be another elixir for it to further cement the economic progress.
India is expected to report higher-than-previously-expected economic growth projections, potentially around 7% for the fiscal year 2023/24 ending in March, Reuters reported. Anticipations for higher annual gross domestic product (GDP) estimate are widespread following the Reserve Bank of India's (RBI) recent revision in growth forecast. Last month, the RBI adjusted its projection for the current fiscal year to 7%, up from the initial estimate of 6.5%.
The United Nations has forecasted India's growth at 6.2 percent in 2024, buoyed by strong domestic demand and notable expansion in both the manufacturing and services industries.
While the world goes through many turmoil amid the ravages of war, India will have to bank on its domestic factors to drive medium-term growth and the upcoming interim budget will prepare the ground for the main budget later this year, D K Srivastava, EY India Chief Policy Advisor, said in a blog post.
"The Government of India (GoI) is set to present the interim budget for FY25 on 1 February 2024. Using fiscal data up to December 2023 from the Controller General of Accounts (CGA) and combining it with full-year budget estimates, revised estimates for FY24 will be assessed. These revised estimates will serve as the base for formulating the budget estimates for FY25," Srivastava wrote in the post.
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He said India stands resilient amidst global economic slowdown as forecasts predict FY24 growth between 6.3% to 6.5%, surpassing the IMF's gloomy projections for global growth. Despite this positive outlook, concerns loom over FY25 as challenges persist in several economic aspects.
As the Government gears up to unveil the FY25 interim budget on February 1, 2024, analysing fiscal data from the Controller General of Accounts (CGA) until December 2023 becomes pivotal. Revised estimates for FY24 will set the stage for formulating FY25's budget.
The gross tax revenue (GTR) initially anticipated an annual growth of 10.4%, but ongoing volatility in CGA data for 1HFY24 complicates predictions. However, early signs suggest surpassing the annual GTR target through increased tax buoyancy or accelerated nominal GDP growth. Potential risks in revenue include probable reductions in union excise duty on petroleum products, offset by robust direct tax gains.
Regarding non-tax revenues, 1HFY24 has seen 78.5% achievement against annual budget estimates. Nonetheless, anticipated shortcomings in disinvestment receipts might slightly exceed non-tax revenue expectations.
On the expenditure front, elevated capital and revenue expenditure percentages during 1HFY24 pose challenges. However, escalating global crude prices hint at potential overshoots in major subsidies, particularly the fertilizer subsidy, urging stringent expenditure adjustments to maintain budgeted fiscal deficit.
The projected fiscal deficit-to-GDP ratio for FY24 at 5.9% may experience pressure due to higher fertilizer and petroleum subsidies, potentially pushing it closer to 6.1%. FY25 demands a firm step towards a 5.2% fiscal deficit to GDP ratio, signaling a glide path alignment towards the mandated 4.5% by FY26 and subsequent reductions.
To sustain medium-term growth, capital expenditure expansion remains pivotal. With global crude price volatility, accelerated efforts in shifting to alternative fuel sources gain significance. The government's focus on advanced digital technology adoption via expanded Production Linked Incentive (PLI) schemes and human capital investment is vital, especially considering India's expanding workforce projected to surpass China by 2025.
As India navigates economic uncertainties, a balanced interim budget coupled with prudent fiscal policies is essential to maintain growth momentum, ensuring a robust economic future for the nation.
Finance Minister Nirmala Sitharaman is set to unveil the interim budget for FY 2024-25 in Parliament on February 1. Preceding the budget, the Ministry of Finance releases the Economic Survey, followed by a press conference featuring the Chief Economic Advisor and other senior officials. As per parliamentary tradition, the government refrains from releasing the Economic Survey before the Interim Budget during an election year.
This budget holds a special significance as it's an interim budget, coinciding with the approaching Lok Sabha elections next year. Sitharaman's prior tendencies indicate a preference for long-term structural alterations rather than immediate tax relief. Analysts predict attention in budget directed towards critical sectors such as the New Tax Regime, quicker tax refunds, strengthening tax collection methods, and streamlining appeals processing.
Source Name : Economic Times