Government To Stay On Path Of Fiscal Consolidation In Budget 2023, Before 2024 Elections, Report

The Narendra Modi government is expected to remain on the path of fiscal consolidation in the last full Budget before the 2024 elections. This is according to a survey of economists conducted by news agency Reuters. According to the survey, more than 80 per cent of the economists said that fiscal consolidation was likely to be the dominant theme in the budget to be announced on February 1.

The news agency polled 37 economists from December 13 to 21. The survey forecast that the government will limit borrowing to 6 per cent of the GDP in 2023-24. This is well above the historic average of 4-5 per cent. 

“We have global economic slowdown concerns and that will have ripple effects on the Indian economy. So the scope for progressive spending … as a factor to drive growth is limited,” Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, told Reuters. 

“Both economic and political compulsions will mean a more challenging environment for aggressive fiscal consolidation next year,” said Sonal Varma, chief economist at Nomura.

While Samiran Chakraborty, chief economist at Citi, said, “The last full budget before the general elections may have a stronger political undertone.”

So far, the Modi government has been largely stuck on a path of fiscal consolidation. But the pandemic severely affected the government’s finances, pushing the fiscal deficit for 2020-21 to a record 9.3 per cent of gross domestic product (GDP), significantly higher than the budgeted 3.5 per cent, the report said. The report further added that a fiscal deficit of 6.4 per cent for 2022-23 is expected, which is lower than the 6.9 per cent fiscal deficit for 2021-22. 

On Tuesday, Finance Minister Nirmala Sitharaman said that despite external shocks and global uncertainties, it intends to meet the fiscal deficit target of 4.5 per cent of GDP by the end of the year 2025-26. The report said that while growth was expected to be faster than that of many other economies, it would be too slow for the job creation needed to pull tens of millions out of poverty in a country. 

The survey of economists said that economic growth is likely to slow to an annual 4.6 per cent in the December quarter from 6.3 per cent reported in the preceding quarter.