(F.E)
Given that we are on the cusp of election season, the Union Budget for FY23 doesn’t seem to pander to any instinctual populism or tactical dole-outs to any target audience. Instead, we have a solid workman-like budget announcement with a singular focus seemingly on government spending to boost the supply side of the economy namely an investment and capital expenditure push. Growth has been prioritized with realistic fiscal deficit targets. The last one year has been a demonstration of the fact that buoyancy in growth and hence tax collections are a better solution to get a hold on fiscal deficit rather than to target the deficit itself for what it is. From that perspective prioritizing growth and recalibrating the glide path of fiscal deficit is not only likely to energize some so-called “old economy” sectors engendering tag-along private sector Capex but also likely to find favor with the equity markets; even as bond markets might witness some uptick in yields.
All the same, the budget surely must be informed by the “agile” framework and “nowcasts” over the forecasts approach supported by real-time data and economic proxy indicators detailed in the Economic Survey. One must assume that in the context of the evolving macroeconomic scenario and the global backdrop there is a willingness to calibrate in real-time as we go along; this is what was also cited as the basis for the response to the COVID-19 emergency. On the other hand, higher allocation towards social infrastructure continues under the flagship “Har Ghar, Nal Se Jal” program and the PM Awas Yojana. The financial assistance to states related to the funding of the infra investments has been expanded significantly. The budget was also pragmatic in extending measures such as the ECLGS for contact intensive sectors like hospitality which were severely affected in the pandemic.
