Making Sense

Last week, India PMI release showed robust economic activity with input cost receding to 40 month lows . Markets also received the advance estimates of National Income for FY 2023 - 24.  The first advance estimates of Nominal GDP peg GDP at 296.58 Lac crores, lower than budgeted estimates of 302.85 Lac Crores. The Nominal GDP is estimated to grow at 8.90% as against budgeted estimates of 10.2%. The revision lower in Nominal GDP could entail either a 12 bps increase in Fiscal Deficit or a 37K cr reduction in fiscal deficit to retain a 5.90% Fiscal Deficit target.  Budget Estimates 2023 - 24 Fiscal Deficit in INR crs          17,86,816 Fiscal Deficit as % of GDP 5.90% GDP (in INR crs)       3,02,85,017     First Advance Estimates   ...

The Union Budget is drawing to a close and I thought of putting down my estimates for the Government Borrowing program.  GoI will present the Union Budget on Feb 1 , 2023.  In accordance with the amendment to the FRBM act, GoI targets to reach the fiscal deficit level below 4.5% of GDP by 2025-26. The Finance Minister said, “We plan to continue with our path of fiscal consolidation, and intend to reach a fiscal deficit level below 4.5% of GDP by 2025-2026 with a fairly steady decline over the period. We hope to achieve the consolidation by first, increasing the buoyancy of tax revenue through improved compliance, and secondly, by increased receipts from monetisation of assets, including Public Sector Enterprises and land.” This entails an annual reduction of 60 - 65 bps in the fiscal deficit number.  Accordingly, FY 24 fiscal deficit is pegged at 5.80% and gross borrowing at 16 trn. For FY 24, budget comes ahead of a heavy state election schedule and 2024 Lok Sabha electi...

"We must all suffer one of 2 things: the pain of discipline or the pain of regret" GoI released the advanced FY 22- 23 GDP estimates.  According to the first advance estimates released by the government, India's GDP may grow 7% for financial year 2022-23. Nominal GDP is estimated at ₹273.08 lakh crore, as against the Provisional Estimate of GDP for the year 2021-22 of ₹236.65 lakh crore. The nominal GDP growth for FY23 is estimated at 15.4% as against 19.5% in FY22. The key take away from the advance estimate release is higher nominal GDP growth gives cushion to the government towards an additional spending of 97K crore while retaining the fiscal deficit at 6.44%.  GoI efforts towards fiscal consolidation aim to bring fiscal deficit at 4.5% of GDP by FY26 which entails a 190 bps reduction in fiscal deficit over 3 years. This implies a 65 bps reduction with fiscal deficit at 5.80% could be targeted for the FY 24 budget.