GDP growth, fiscal deficit, disinvestment & others: Five key numbers to watch out for in Budget 2022-23
India Today
Union finance minister Nirmala Sitharaman is all set to lay out the country’s economic growth plan in the upcoming Budget on February 1. Here are the five key numbers to be watched out for in the upcoming Budget:
Amid the third wave of coronavirus, Union finance minister Nirmala Sitharaman is all set to lay out the country’s economic growth plan in the upcoming Budget on February 1. The government is expected to spend more money on infrastructure and health care to revive the pandemic-battered economy. Here are the five key numbers to be watched out for in the upcoming Budget:
The pandemic has had a devastating human and economic cost. Gross Domestic Product (GDP) dropped 7.7 per cent in the financial year 2021. However, the latest estimate shows the growth will bounce back by 9.2 per cent in the ongoing financial year compared to the last year. But Rating agencies see the growth with some riders.
“GDP will grow 7.6 per cent Year on Year in FY2023. After a gap of two years, the Indian economy will show a meaningful expansion, as the real GDP in FY23 will be 9.1 per cent higher than the FY2020 (pre-COVID level) GDP level. However, the size of the Indian economy in FY23 will be 10.2 per cent lower than the FY23 GDP trend value,” credit rating agency India Ratings and Research recently said in its webinar on the economic outlook.
More than two-third of the government’s receipts come from taxes. The share of personal income tax has surpassed the other direct tax, corporate tax, after about 20 years. After the pandemic, corporate tax plunged nearly 20 per cent in FY2021 compared to FY 2020. At the same time, personal taxes dropped only around seven per cent.
The tax-GDP ratio is still very low compared to other countries. For instance, the tax-GDP ratio in OECD countries has been above 30 per cent for the last 20 years. In contrast, this ratio in India was hovering around 10 per cent even before Covid. This low tax-GDP ratio has provided the government space to peg the overall tax revenue this time to more than the FY2022 Budget level of Rs 22.17 lakh crore.
The fiscal deficit shows that the government is spending beyond its means. The gap is usually financed by debt, leading to another burden in terms of interest. Data shows fiscal deficit in FY21 was Rs 18.5 lakh crore as opposed to Rs 12 lakh crore in the previous Budget. However, most of this rising deficit is after the accommodation of off-budget borrowings, which are now reported as the government’s borrowings.
Additional spending as a fiscal stimulus, especially in FY21 (revised estimate), has pushed the total expenditure from Rs 26.86 lakh crore to Rs 34.5 lakh crore almost 28 per cent higher compared to 19 percentage points the previous year. Capital expenditure rose to 2.5 per cent of GDP as per FY22 Budget estimate, up from 2.2 per cent in FY21 (RE) and 1.6 per cent in FY20.
