New Delhi: In her Budget 2023 speech Wednesday, Finance Minister Nirmala Sitharaman said that the Indian economy is set to grow at 7 per cent in financial year 2022-23, but did not provide an estimate for growth for the upcoming financial year. She added that the fiscal deficit would be controlled at 6.4 per cent in 2022-23, as budgeted initially, and would further reduce to 5.9 per cent in 2023-24.
She further reiterated the government’s commitment to the fiscal glide path that would see the fiscal deficit fall to below 4.5 per cent by 2025-26.
“In my Budget speech for 2021-22, I had announced that we plan to continue the path of fiscal consolidation, reaching a fiscal deficit below 4.5 per cent by 2025-26 with a fairly steady decline over the period,” Sitharaman said. “We have adhered to this path, and I reiterate my intention to bring the fiscal deficit below 4.5 per cent of GDP by 2025-26.”
The finance minister’s estimate for 2022-23 comes at a time when the first advance estimates for the year, released by the Ministry of Statistics and Programme Implementation on 6 January, also pegged the GDP growth for the year at 7 per cent.
However, the Economic Survey 2022-23, released Tuesday, predicted that growth would be at 6.5 per cent in 2023-24, although adding that this could range between 6-6.8 per cent.
The advance estimates predict that the agriculture sector will register a growth of 3.5 per cent in 2022-23 — faster than the 3 per cent registered in the previous year. However, the estimates also predict a sharp slowdown in other key sectors such as manufacturing, and mining and quarrying. The manufacturing sector was expected to grow at an anaemic 1.6 per cent, compared with a growth of 9.9 per cent in 2021-22.
Similarly, the growth in the mining and quarrying sector is set to slow to 2.4 per cent in 2022-23 from 11.5 per cent in the previous year.
Notably, it was the services sectors that were expected to register strong growth in 2022-23. The grouping of ‘electricity, gas, water supply & other utility services’ was predicted to grow by 9 per cent in the first advance estimates, up from 7.5 per cent in 2021-22. The construction sector is expected to grow by 9.1 per cent, and ‘trade, hotels, transport, communications & services related to broadcasting’ grouping is expected to grow by 13.5 per cent.
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Fiscal deficit under control
The finance minister said that the fiscal deficit — the difference between its revenue and expenditure — for 2022-23 would meet the target set for the year in the last budget, of 6.4 per cent on the back of buoyant revenues, even though the government’s expenditure on subsidies — food, fuel, and fertilisers has ballooned.
The Parliament last December approved a demand by the government for additional spending to the tune of Rs 3.26 lakh crore, most of which were for food (Rs 80,000 crore) and fertiliser (Rs 1.09 lakh crore) subsidies, apart from Rs 22,000 crore to be transferred to oil marketing companies for losses they incurred on LPG cylinder sales.
However, despite the rise in expenditure, the government’s tax revenues have been strong, which has allowed it to control the fiscal deficit
(Edited by Uttara Ramaswamy)
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