Photographer: Sumit Dayal / Bloomberg
Photographer: Sumit Dayal / Bloomberg
India’s annual budget on Monday is Prime Minister Narendra Modi’s chance to boost demand for and investment in an economy cratered by the world’s second largest coronavirus outbreak.
His government’s growth-oriented plans will be outlined by Finance Minister Nirmala Sitharaman when she delivers the budget speech starting at 11am in New Delhi. She is expected to set aside more money for health care and infrastructure development and pay for it in part by raising record amounts by selling stakes in state-owned companies.
Read: India records 11% GDP growth in fiscal 2022, aided by vaccination
While the budget’s success will depend on how effectively India is able to control rising infections through vaccination in the country of more than 1.3 billion people, here are five key numbers to watch out for in the spending plan:
Nominal GDP
India’s economy is expected to recover next year
Source: Bloomberg, Government of India
The IMF forecast India’s economy will grow 11.5% in the year beginning in April, which is higher than the 9.2% estimated in a Bloomberg survey. Add inflation of about 4.5% to those projections and you get nominal gross domestic product growth on the order of nearly 14% -16%. The number is critical because the budget assumptions for income and expenditure are based on this. Some economists, including Citigroup Inc.’s Samiran Chakraborty, expect nominal GDP to be pegged at 15% – the bullish end of the band.
Tax Revenue
India’s tax revenues are expected to grow 19% next year
Source: Citi Research, Government of India
Tax collection in India has been on a rebound lately as momentum in the economy grows following the lifting of lockdowns to combat the coronavirus outbreak. That should give Sitharaman reason to peg total tax revenues to a level above the 16.3 trillion rupees ($ 223 billion) budgeted for the current year.
Citigroup expects annual growth of 19% in gross tax revenues next year, with healthier tax revenues on goods and services driving overall collection. It expects GST to average 1.15 trillion rupees per month next fiscal year – which translates to a total of nearly 14 trillion rupees for the year. Higher excise duties, especially on the sale of petroleum commodities, and robust corporate tax collection, thanks to a recovery in corporate income, will also help.
Expenses push
Government investment has taken a hit in recent years
Source: Government of India, Bloomberg
A labor market paralyzed by the effects of the pandemic and growing inequality will put pressure on Sitharaman to increase spending on everything from infrastructure projects to social sector and healthcare. While economists surveyed by Bloomberg see government investment, as reflected by gross fixed capital formation, increase 11.2% next fiscal year, Credit Suisse analysts see the Treasury Secretary increasing total spending by 20% -21% over the next fiscal year. compared to the 30.4 trillion rupees budgeted for the 12 months. marching. That increase can help boost growth.
Sale
India has only met its divestment target twice in nine years
Sources: Department of Investment and Public Asset Management, India Budget
Selling stakes in state-owned companies could be a sure way to raise money in the new year. After the pandemic devastated the government’s plan to raise 2.1 trillion rupees through divestment in the current tax system, it may pursue that goal and strive for record revenues from offloading stock in companies including Life Insurance Corp. from India.
Citigroup expects the Modi government to double its non-tax revenue sources of about 6 trillion rupees next year from about 3 trillion rupees put in place for the current period. Another source of income will come from the auction of 5G radio waves, in addition to an annual dividend – of about 800 billion rupees – from India’s central bank, Citigroup said.
Tax deficit
India’s budget deficit will miss its target for the fourth year in a row
Source: Government of India, Bloomberg Surveys
With the pandemic disrupting the government’s fiscal math, Sitharaman is nowhere closer to reaching the 3% budget deficit mandated by law. Economists polled by Bloomberg predict she will target a 5.5% of GDP deficit next year, after it likely widened to 7.25% in the current year.
That means, according to a Bloomberg survey, that New Delhi could announce a gross financing plan of 10.6 trillion rupees. While that will be lower than this year’s record high of Rs 13.1 trillion, the amount will be 75% higher than the average for the previous five years.
– With the help of Manish Modi and Tomoko Sato