In a statement on Tuesday, Union Finance Minister Nirmala Sitharaman expressed optimism about India’s relative and absolute growth performance in the upcoming years. She said that the 2019 Union budget will need to be “carefully crafted” to sustain growth and control inflation. She stated that the imminently high cost of electricity is India’s top worry.
Sitharaman said India was keeping a close eye on the issue as nations around the world struggle with high inflation and declining economic development as a result of tightening monetary policy and a drop in global demand.
At the Brookings Institute, she was taking part in a fireside discussion with renowned economist Eshwar Prasad. The minister is in Washington, DC, for the World Bank and International Monetary Fund’s annual meetings.
Focus on Budget 2023
The minister stated that inflation worries must be addressed first in the upcoming budget in 2023. For the most of 2022, inflation was above the 6% tolerance level, which prompted the Reserve Bank of India to boost interest rates to stifle demand.
In addition, the conflict between Russia and Ukraine has skyrocketed oil and gas prices and sparked worries that India’s economic recovery may be slowed down. The problems have been made worse by the rupee’s decline, which has increased import prices. For its oil needs and about half of its gas demands, India is 85% dependent on imports.
“At this point, it’s a little early to give specifics (about the upcoming budget), so that could be challenging. However, in general, the priority for growth will remain at the very top. Even while I discuss the worries that inflation brings to mind. Therefore, concerns about inflation must be addressed. The obvious issue would then be, “How would you control growth?,” Sitharaman asked.
On February 1 of the following year, the minister is expected to deliver the annual budget for the fiscal year beginning April 2023.
The last two government budgets prioritised capex-driven growth while maintaining a glide path for the budgetary deficit. The minister claimed that although borrowing by the federal government and the states increased in 2020 and 2021 (to pay for GST compensation), the government has been open about its deficit. According to the Centre, the fiscal deficit will drop from 6.7% of GDP in FY22 to 6.4% in FY23.
The central bank downgraded its estimate of India’s GDP growth for the current fiscal year from 7.2% to 7% last month. Other rating agencies have also cut their predictions for India’s economic growth, citing the effects of geopolitical unrest, tightening financial conditions worldwide, and a slowdown in external demand.
On this, Sitharaman stated, “We are closely watching and making sure that stress does not be passed on to the people.” Sitharaman was referring to the global tension that strikes India in the form of energy, fertiliser, or food. In order to shield the average person from the effects of rising fuel prices, the excise charge on petrol was reduced. That is one method by which we make sure that the weaker groups are not harmed, she said.