The last full budget of the NDA government will boost welfare spending with a focus on rural and infra capex, according to Union Budget 2023. The Swiss brokerage UBS said the fiscal gap could be at 5.8 per cent next fiscal due to a reduction in subsidies despite a likely fall of 10.5 per cent in nominal GDP growth.
The budget is likely to boost rural agri spending by $10 billion, 15 per cent higher than FY 23 and maintain 20 per cent growth in public capex over the current fiscal, according to UBS India economist Tanvee Gupta Jain. She believes that the subsidy burden will be lessened in FY 24 as the government may not go beyond fiscal boundaries with its election-oriented budget.
She believes that this will create more fiscal space to reallocate money towards existing schemes like MGNREGA, rural housing, and roads. Jain noted that the economy will moderate further and pencils in a GDP growth of only 5.5 per cent for the next fiscal, lower than 6 per cent, and that global growth and the impact of monetary tightening coupled with the spillover of an expected global slowdown this year are two things that Jain noted in the news agency PTI.
She said India's structural growth story remained intact and that the domestic economy would maintain potential growth of 5.75 per cent to 6.25 per cent in the medium term. Jain said that she expects consumer price inflation to be moderate toward 5 to 5.5 per cent in FY 24 from 6.6 per cent in FY 23 but to stay above RBI's 4 per cent target in FY 24 due to uncertainty.
The government is trying to reduce food and fertiliser subsidies in 2023 -- 24 to $44.6 billion in the fiscal year from April, down 26 per cent on-year to prevent a fiscal deficit caused by the COVID-19 pandemic.
Food and fertiliser subsidies alone account for one-eighth of India's total budget spending this fiscal year, but the reduction in food subsidies could affect the ruling party's political fortunes in the upcoming elections. The spending on food subsidies is expected to go down to around 2,30, 000 crore in the upcoming fiscal, from Rs 2,70, 000 crore in the current fiscal.
Spending on fertiliser subsidies is likely to fall to about 1,40, 000 crore, compared with nearly 2,30, 000 crore in the current fiscal, according to news agency Reuters.