Economic Survey: The government aims to reduce deficit and increase infrastructure spending in Wednesday's budget, so there are no giveaways expected
The budget presented on Wednesday, the final full-year budget before the upcoming presidential elections, won't include any significant giveaways. The government of Prime Minister Narendra Modi will continue to tighten its belt, and this fiscal year's economic growth is projected to slow to 6.5% from an estimated 7.0% in 2017 and 8.7% in 2016.
Due to persistently difficult global financial circumstances and supply chain disruptions everywhere, the economy is anticipated to continue slowing down. The focus of the government will be on asset sales to increase income and infrastructure expenditure to spur development.
These are the main conclusions drawn from the Economic Survey, the yearly economic report card delivered one day before the budget. The availability of fiscal space with the governments has become crucial due to the ongoing global risks and uncertainties, according to the survey that Union Finance Minister Nirmala Sitharaman presented on Tuesday.
In order to counteract the impacts of the pandemic and the associated economic downturn, the government said it would continue to restore the budgetary headroom that had been lost as a result of public expenditure.
According to the article, the administration wants to reduce the budget deficit, which is presently 6.4%, and keep a tight rein on expenditure to preserve space for policy action in a volatile international climate after Russia's invasion of Ukraine.
According to the survey, the administration could try to reduce the budget deficit to less than 6%. The gap between total government expenditure and total income is known as the fiscal deficit.
There is no cause to worry, according to the survey, which was prepared by V Anantha Nageswaran, the chief economic adviser to the finance minister. But according to the study, "there is a need for ongoing vigilance and commitment to the path of budgetary discipline."
The rupee is expected to remain under downward pressure as long as the US Federal Reserve maintains raising interest rates. Although it may have peaked, inflation is still a major problem in India and throughout the globe. According to the study, this indicates that the cycle of interest rate increases will continue and borrowing costs will stay "higher for longer."
The good news, according to the study, is that the central bank's forecast of 6.8% retail inflation is neither too high to discourage private spending nor too low to reduce inducements to invest.
The country's civil aviation industry, which has "huge potential" amid expanding middle-class demand and greater discretionary incomes, is one of the economy's bright spots, according to the research. As demand increases, unsold house inventories are beginning to decline. The poll predicts that FDI (Foreign Direct Investment) would increase again as a result of the nation's rapid expansion. The real estate market is booming, and construction jobs-generating projects are picking up.
Although commodity prices have declined from their heights, they are still high after the crisis in Russia and Ukraine. The study predicts that "strong local demand despite rising commodity prices would increase India's overall import bill."
This can result in "unfavorable trends in the current account balance" that "may be made worse by plateauing export growth due to weakening global demand." The current account displays a country's imports and exports of commodities and services, revealing the pattern of international commerce.
The IMF's estimate of 6.1 percent is lower than the finance ministry's prediction of 6.5 percent growth. India will continue to have the fastest-growing economy in the world if the finance ministry's prediction is accurate.
Even while it is doubtful that the administration would include any populist expenditure initiatives to win over voters in the budget that will be unveiled on Wednesday, there is always potential for vote-winning plans in the interim budget that will be unveiled before the election next year.