Finance minister Sitharaman on February 1 pegged the government's fiscal deficit for the financial year 2022-23 at 6.4% of gross domestic product (GDP) as the budget recognized the need to boost growth.
The Union government's fiscal deficit was down 35.3 percent year-on-year at Rs 6.96 lakh crore in April-November 2021 period, accounting for 46.2 percent of the Budget estimate for the current financial year, as tax collections remained robust and spending muted.
The 10-year government bond yield surged nearly 20 basis points after the Center said it had missed the fiscal deficit target for the financial year 2022.
The government also increased the fiscal deficit and borrowing target for the next year. Analysts say that no mention of tax changes required for foreign investors to invest in bonds also dampened sentiment.
The biggest day in the financial year in the country is here. While the hype around the Budget this year is muted thanks to the meltdown in global stocks caused by the US Federal Reserve's aggressive pivot towards fighting inflation, the event still holds importance for the domestic investors.
For seasoned traders, it is the day they await all year due to immense volatility in the market caused by the finance minister's speech and as the market digests the fine details of the Budget document.
What time will the Budget be presented?
Finance Minister Sitharaman will present the Budget document at 11am today and commence her fourth Budget speech as the finance minister of the country.
The Budget is going paperless this year again, with the government concerned about safety issues posed by the spread of the new variant of the coronavirus.
What's the economic backdrop?
Decent but not great. Earlier this month, the first advance estimate of national income projected the economy to grow 9.2 percent in 2021-22, which will help the overall size of the economy to surpass pre-pandemic levels.
The International Monetary Fund, however, slashed its estimate for India's GDP growth for the current fiscal to 9 percent from 9.5 percent due to the impact of the spread of the Omicron variant of the coronavirus across the country in the last two months.
The Reserve Bank of India in its previous monetary policy meeting was hard-pressed to state that the economic recovery is fragile in the face of threats from new variants and slack in demand.
The consumption economy remains lackluster, with private consumption expenditure expected to be below the pre-pandemic level at the end of FY22. Several consumer-facing companies have already warned of a slowdown in the rural economy, a major driver of consumer demand growth.
What's Dalai Street want?
Brokerage firm Morgan Stanley is counting on the government to walk the path of fiscal prudence after taking a detour last year due to the exigencies caused by the COVID-19 pandemic.
“The Union Budget 2022-23 is expected to be growth-oriented given the state election lined up in over five states in 2022. The consequent higher government spending on infrastructure development will help the economy gain further growth momentum,” said brokerage firm Axis Securities in a note.
Capital expenditure will likely remain the focus of the hour given the government's reluctance to blow the coffers to provide direct support to consumers, who have been hit hard by the vagaries of the pandemic.
What does Main Street want?
Support for the consumer economy. Hindustan Unilever's Chief Sanjeev Meta, in a post-earnings press conference, urged the government to put more cash in the hand of the consumers and continue existing schemes brought out during the pandemic to help the most vulnerable sections of the economy.
“The Union Budget could focus on addressing some disparity with income segments and sectors through incentives and policy initiatives, especially given the weak rural demand ahead of the elections in key states in the coming months,” brokerage firm Shrek said in a note.
Former RBI Governor D Subbarao told PTI that government should focus on bridging the widening inequality caused by the pandemic, which could dent long-term prospects of the economy.
You must be logged in to post a comment.