The FY23 Union Budget will be presented amidst the backdrop of underlying economic cross currents.
Download ReportFY23 Union Budget Preview Fiscal consolidation: Making haste slowly
The FY23 Union Budget will be presented amidst the backdrop of underlying economic cross currents. Despite a strong V-shaped GDP growth in FY22 along with recent reforms enhancing India’s investment potential, the economic healing from scarring effect of the pandemic will get protracted amidst unevenness in the recovery process. Since fiscal policy is best suited for addressing long term changes in output, the heavy lifting needs to continue to ensure the recovery becomes both durable and inclusive. We expect the government to continue following a countercyclical fiscal strategy with strong emphasis on public capex, ease of doing business, targeted tax incentives to support consumption and exports, and announce steps to attract durable foreign savings. This would call for phasing out of certain pandemic era exceptional expenditure support along with a recalibration of the FRBM trajectory in the post pandemic world. Overall, we expect the central government to project fiscal deficit target at 6.3% of GDP vis-à-vis the retained target of 6.8% in FY22. With net g-sec borrowing likely to be pegged close to Rs 9.08 tn, supply pressure would remain elevated, thereby providing upside to bond yields.