Photographer: Sumit Dayal / Bloomberg
Photographer: Sumit Dayal / Bloomberg
India’s annual budget on Monday will be the chance for Prime Minister Narendra Modi to boost demand and investment in an economy cratered by the second largest coronavirus outbreak in the world.
His government’s plans for growth will be presented by Finance Minister Nirmala Sitharaman when he will deliver the budget speech starting at 11am in New Delhi. It expects to allocate more money for health care and infrastructure development and to pay part of it by raising record amounts by selling stakes in state-owned companies.
Read: India increases GDP growth by 11% in fiscal year 2022, helped by Vaccine Drive
While the success of the budget depends on how effectively India is able to counter the growing vaccine infections in the country of over 1.3 billion people, here are five key numbers to look out for in your spending plan:
Nominal GDP
India’s economy is expected to return next year
Source: Bloomberg, Government of India
IMF India’s economy forecast will expand by 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 these projections and you will get a nominal growth rate of gross domestic product in the range of almost 14% -16%. The number is essential, as the budget assumptions for revenue and expenditure are based on this. Some economists, including Samiran Chakraborty of Citigroup Inc., expect nominal GDP to be set at 15% – the end of the group.
Tax revenues
Tax spending in India is expected to increase by 19% next year
Source: Citi Research, Government of India
Tax collection in India has shown an increase lately, as the momentum grows in the economy, after lifting blockages to combat the coronavirus outbreak. This should give Sitharaman reasons to set global tax revenues higher than the 16.3 trillion rupees ($ 223 billion) budgeted for the current year.
Citigroup expects a 19% annual increase in gross tax revenue next year, with healthier revenues from taxes on goods and services, contributing to increased global collection. The GST is expected to reach an average of 1.15 trillion rupees per month in the fiscal year – which translates to almost 14 trillion rupees in total for that year. Higher excise duties, especially from the sale of petroleum products, and the solid collection of corporate income tax due to the return of the company’s revenue, will also help.
Spending Push
Government investment has been successful in recent years
Source: Government of India, Bloomberg
A labor market affected by the impact of the pandemic and growing inequalities will put pressure on Sitharaman to increase spending on everything from infrastructure projects to the social sector and health. While economists surveyed by Bloomberg believe that government investment, reflected in gross fixed capital formation, will increase by 11.2% next fiscal year, analysts at Credit Suisse see the finance minister increase total spending by 20% -21%. at 30.4 trillion rupees budgeted for the 12 months to march. This growth can help sustain growth.
Stake sale
India has achieved its divestment target only twice in nine years
Sources: Department of Investment and Public Asset Management, India Budget
Selling stakes in state-owned companies could be a safe way to raise money in the new year. After the pandemic destroyed the government’s plan to raise 2.1 trillion rupees through divestment in the current tax, it can pursue this goal and target record revenues from unloading shares in companies, including Life Insurance Corp. from India.
Citigroup expects the Modi government to double its non-taxable revenue sources from about 6 trillion rupees next year to about 3 trillion rupees written in the current period. Another source of income will be from the 5G wave auction, in addition to an annual dividend – of about 800 billion rupees – from the central bank of India, Citigroup said.
Fiscal deficit
India’s budget gap will lose target for the fourth year in a row
Source: Government of India, Bloomberg polls
With the pandemic disrupting the government’s fiscal math, Sitharaman is nowhere near reaching the 3% budget gap required by law. Economists surveyed by Bloomberg predict that it will target a deficit of 5.5% of GDP next year, after probably expanding to 7.25% this year.
That, according to a Bloomberg poll, means New Delhi could announce a gross loan plan of 10.6 trillion rupees. Although this will be lower than this year’s record of 13.1 trillion rupees, the amount will be 75% above the average of the previous five years.
– With the assistance of Manish Modi and Tomoko Sato