Temporary revenue spending in 2010 should not recur next year.
In 2010, the delta wave hit the Indian economy, requiring the government to step up free edible grain distribution and other Covid-related spending. We also announced additional subsidies for fertilizers. The rationalization of such subsidies can be expected in the next budget, opening up financial space for more productive fixed investment. The Minister of Finance Initially, we budgeted about 1.5% of GDP for such subsidies in 2010. However, with additional spending, this figure is expected to be up to 2.3%. For FY2011, if it returns to normal levels, there may be some financial margin here, in the range of 0.8-1%.
The formalization trend continues and tax collection continues to be strong.
This year’s tax collection has been strong so far, well above the budget estimate (BE). In particular, this is due to strong corporate revenue growth profiles (for example, Nifty is expected to record revenue growth of over 15% between 2010 and 2012) and increased formalization. These trends should continue.
High growth trend continues in 2011:
Real GDP growth in 2011 is estimated to be 7.4%, which may have a positive side given recent trends. According to the IMF and OECD, real GDP growth in 2011 could exceed 8%. This is in part because the impact of the Covid-19-related turmoil has diminished and business confidence has increased with each successive wave. Nominal GDP (NGDP) growth in 2011 should exceed 14%.
High NGDP growth in 2010 to increase spending in 2011:
In addition, current forecasts predict that nominal GDP in 2010 will grow at 17.6% year-on-year, which is higher than BE. This relatively high growth provides a larger foundation for FY23 GDP, which means that FY23’s YoY spending line items will be higher than normal.
Significant spillover of investment in 2011 to increase financial space next year:
Regarding the receipt of investment withdrawal, there was a big delay in achieving the target set in Budget-2021. But on the plus side, many foundations have been completed for some target investment withdrawals. For example, LIC is expected to fund approximately 800 billion to 1 trillion rupees. Therefore, this spillover will free up some of the financial space for 2011.
Budget deficit There may be a slight integration in 2011.
Minister of Finance Namara Sisalaman Proposes a fiscal consolidation glide path to reduce the budget deficit to 4.5% of total GDP by 2014, and presents an anti-circular fiscal policy to boost medium-term economic growth. In 2009, the central government’s budget deficit reached 9.2% of GDP. In 2010, we predict that the center’s target budget deficit will be defeated by 6.8% GDP. The general government debt-to-GDP ratio is estimated to be around 90% by the end of 2010. Given all this and the need to support early growth recovery, we feel that the government may aim for a slight integration of 0.5 to 0.8 percent of the 2011 budget deficit.
(Disclaimer: The author
IIFL Securities Chairman
The opinions expressed in the article belong only to the author)
Union Budget 2022 Expectations: Enough financial space to make room for growth in Budget 2022
https://economictimes.indiatimes.com/markets/stocks/news/sufficient-fiscal-space-to-create-room-for-growth-in-budget-2022/articleshow/89156296.cms Union Budget 2022 Expectations: Enough financial space to make room for growth in Budget 2022