It would also be the last policy of Rajan
The Indian economy appears to have slowed down in 2018-19 due to lower private consumption, tepid growth in fixed investment and muted exports, a finance ministry report has said.
If the government cuts wasteful expenditure as it is trying now, the deficit would at most fall to 8 per cent, not less than that.
At a pre-Budget meeting, the FM was asked to ensure that NBFCs come out of the liquidity crisis they are facing with the help of RBI. They also spoke about the futility of trying to achieve a 3 per cent fiscal deficit target over the medium term.
There has been a decline in foreign direct inflow from China in the last three years, with FDI coming down to USD 163.77 million in 2019-20, Minister of State for Finance Anurag Singh Thakur informed the Lok Sabha on Monday. Giving details of the total foreign direct investment (FDI) inflow from Chinese companies in India, he said, it was USD 350.22 million in 2017-18, while it declined to USD 229 million in the following year.
The finance ministry on Wednesday said the government will borrow Rs 4.34 lakh crore in the second half of the current fiscal to meet its expenditure requirement amid COVID-19 crisis afflicting the country's economy.
The Centre could further moderate its divestment target for 2024-25 (FY25), as it does not expect large receipts from asset sales - except some ongoing strategic ones, including IDBI Bank, which could spill over into next financial year. Also, it may drastically reduce its FY24 divestment target of Rs 51,000 crore. "We are still evaluating the Budget estimates for FY25. "New big-ticket asset sales are unlikely.
'The finance ministry's decision to accept the deficit target of 4.5 per cent in 2025-2026 appears to have emanated from its endorsement of the Finance Commission's view that the Indian economy will continue to remain impacted by the pandemic, adversely undermining its growth potential,' notes A K Bhattacharya.
Getting the balance between fiscal restraint and growth-contracting policy remains a problem.
Finance Minister Arun Jaitley should not drop the ball on continuing the battle against black money and move towards digital transactions to reduce the preponderance of cash in the economy, says A K Bhattacharya.
West Bengal, the chief minister said, cannot be compared with other states and despite all hurdles it had an increased revenue generation over the last three years from Rs 21,000 crore (Rs 210 billion) to Rs 40,000 crore (Rs 400 billion).
The ministry sought to allay the rating agency's concerns and said economic growth was on an upward swing.
The captains of Indian industry described Narendra Modi government's maiden budget as one with "the right intent and in the right direction".
'Event management can distract from, but not permanently mask, execution failures,' points out Rathin Roy, director, National Institute of Public Finance and Policy.
'Swachh Bharat Cess imposed last year should be made broad-based.' 'Budget should be predominantly economy/ business-oriented and problem-solving rather than political consideration-based.'
Fitch Ratings on Thursday said the resurgence of COVID-19 infections may delay India's economic recovery, but won't derail it, as it kept the sovereign rating unchanged at 'BBB-' with a negative outlook. It projected a 12.8 per cent recovery in GDP in the fiscal year ending March 2022 (FY22), moderating to 5.8 per cent in FY23, from an estimated contraction of 7.5 per cent in 2020-21. Fitch had in June last year revised outlook for India to 'negative' from 'stable' on grounds that the coronavirus pandemic had significantly weakened the country's growth outlook and exposed the challenges associated with a high public debt burden.
Ahead of the Budget, the government has achieved almost half the divestment target of Rs 65,000 crore. FY23 divestment receipts are unlikely to be anywhere close to the budgeted target.
Need of the hour is to spend to grow more, the study said.
There are a couple of proposals, however, whose goals are not easily achievable.
'Whatever happens in any part of the world affects us.'
Besides advancing the presentation of the Budget to perhaps the first week of January, , there are four new initiatives that could be rolled out from the next Budget, says A K Bhattacharya.
IThe fiscal deficit target for 2020-2021 was originally set at 3.5 per cent of GDP. But the government's revenues have collapsed and its expenditure burden will only increase over the Budget estimates.' With the government having already planned for an additional borrowing of over Rs 4 trillion, the fiscal deficit for the current year would be much higher than the Budget estimate, notes A K Bhattacharya.
The government plans to raise resources to finance capital spending beyond the Rs 3.10 lakh crore budgeted for 2017-18 through higher borrowing or divestment receipts.
Making a case for an optimal fiscal stance, the Economic Survey on Friday said growth leads to debt sustainability and not necessarily vice-versa. "This is because debt sustainability depends on the 'Interest Rate Growth Rate Differential' (IRGD) i.e. the difference between the interest rate and the growth rate in an economy. "With the Indian context of potential high growth, the interest rate on debt paid by the Indian government has been less than India's growth rate by norm, not by exception," it said.
The industrial output for the third month in a row remained in the negative territory, contracting 1.5% in January
Significantly, about half of the CEOs who took part in the survey indicated that they propose to increase their investments in near future, 45 per cent cited no change in investment levels, while only 5 per cent expected a fall.
The Budget sets out a comprehensive vision.
The obvious temptation for Mr Jaitley would be to achieve a better fiscal deficit figure than what he had promised in July.
Government needs tight control over both expenditure and populism.
Air India expects to wipe out some red marks from its balance sheet.
Lower interest rates needed to boost manufacturing, officials say.
The market breadth ended weak on the BSE with 2,086 shares declining and 893 shares advancing.
'If such inflows materialise, what will be the effect on the rupee's value -- and therefore on exports growth, the only sustainable path to recovery?', asks Mihir S Sharma.
What might be useful is targeted assistance to those sectors and individuals that are disproportionately affected, suggests Mihir S Sharma.
There appears to be a growing perception among the political class that faster growth will not create jobs fast enough and, therefore, welfare spending needs to be drastically increased, says T T Ram Mohan.
Whether this remains under control in the coming months will depend on the future intensity and spread of the Russia-Ukraine war, and the effectiveness of the Indian government's response, points out A K Bhattacharya.
A strong showing will be vital to Narendra Modi's chances of a second term.
Finance Minister Nirmala Sitharaman on Monday tabled the Economic Survey 2021-22 along with Statistical Appendix in the Lok Sabha on the first day of the Budget session of Parliament. Later, the Lok Sabha was adjourned till tomorrow. The Economic Survey will now be tabled in the Upper House. The Budget Session of the parliament commenced on January 31 with President Ram Nath Kovind's address. The first part of the Budget session of Parliament will be held from January 31 to February 11 and the second part of the Budget session will take place from March 14 to April 8.
Stating that a weak fiscal position continues to constrain India's sovereign ratings, Fitch said the next government's medium-term fiscal policy will be of particular importance from a rating perspective.
'If you do quick back-of-the-envelope calculation, someone earning Rs 10 lakh can get a benefit of anywhere between Rs 35,000 and Rs 45,000, even if s/he is availing exemptions.' 'A large proportion of people do not avail full exemptions as they don't have money to invest in those schemes.'
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