Due to the recent COVID-19 pandemic and the ongoing Russia-Ukraine war, circumstances are unique for the Union Budget 2023-24. An economic slowdown is expected, fiscal deficit is high, and national elections are due. In this context, the key statistic to watch in the budget would be the ‘primary deficit’. In a piece for Mint, Dr Niranjan Rajadhyaksha, Executive Director, Artha Global, takes stock of the fiscal situation in India and outlines key expectations from the upcoming Union Budget.
Excerpts below:
“Two themes provide the backdrop of fiscal policy since July 2019. First, the credibility of budgeting has improved over the past four years, thanks to more transparent accounting as well as more reasonable assumptions on economic growth. […] Second, public finances have been hit hard by two exogenous shocks which no government could have controlled: the dislocation during the covid pandemic after March 2020, followed by a jump in energy prices after the Russian invasion of Ukraine in February 2022. These two shocks messed up the finances of most countries […]. However, the Indian fiscal response to the pandemic was more careful than in many other large economies.”
“Public debt dynamics will need to be tracked closely. […] In its recent review of the Indian economy, the International Monetary Fund estimated that the debt-stabilizing primary deficit is 2.3% of GDP. It will be a number worth watching on 1 February.”
Read the full article here.
