Analysts at Australia and New Zealand Banking Group (ANZ) came out with a preview of India’s FY 2022-23 annual budget, to be announced on February 01, 2022.
The investment expects, “The central government to clock a fiscal deficit of 6.6% of GDP in FY22, lower than the budgeted 6.8%.”
Key highlights
FY22 has been fortuitous for India’s fiscal health as the rebound in nominal GDP beat expectations, and also fed into high tax buoyancy that will help cover additional spending and a shortfall in disinvestment receipts.
However, the tide could turn in FY23 as both GDP growth and tax buoyancy are expected to normalize, while the economy will still need fiscal handholding amid private sector weakness.
A fine balancing act between fiscal retreat and economic recovery is thus needed. An elevated borrowings program alongside a challenging economic and financial market backdrop could pressure yields higher, although this will likely be within the RBI’s tolerance threshold.
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