The government will keep growth concerns “absolutely on top” while firming up proposals for the next Budget and also take into account the need to tackle inflation risks, finance minister Nirmala Sitharaman has said.
Responding to a question on the FY24 Budget during a chat with economist Eshwar Prasad at the Brookings Institute in Washington DC, the minister also flagged elevated oil prices as one of the biggest worries for the economy.
“Specifics (of the Budget for FY24) may be difficult at this stage because it’s a bit too early. But broadly, the growth priorities will be kept absolutely on the top… inflation concerns will also have to be addressed. But then how would you manage growth would be the natural question,” she said.
The Budget for FY24 is scheduled to be presented on February 1, 2023 and the finance ministry usually starts holding customary pre-Budget meetings with stakeholders from November.
Several independent agencies have scaled down their FY23 growth projections for India in recent weeks after the June quarter recorded lower-than-expected economic expansion of 13.5%, even on a favourable base amid growing external headwinds and tightening interest rates across the globe.
The International Monetary Fund has cut its FY23 growth prediction for the country by 60 basis points to 6.8%, while the World Bank has pegged it at 6.5%, the gloomiest forecast by any multilateral body for the current fiscal. The forecast by most others is in the range of 6.7-7.3%. Only the United Nations Conference on Trade and Development has predicted a lower 5.7% growth for India but that is for calendar year 2022.
The minister also said that India is talking to different countries to make Rupay acceptable outside the country also.
In response to a question on startups, which are contemplating moving overseas, Sitharaman said the government is ready to talk with them and address their issues to help them stay in the country.
Meanwhile, consumer price inflation inched up further in September to 7.41% (from 7% in August) and remained above the upper band of the central bank’s medium-term target of 2-6% for the ninth straight month.
The minister indicated that the Budget proposals will hold the clue as to how India is “going to be able to balance the two” (growth and inflation) and make sure the economy grows at a healthy pace. Even multilateral institutions, which have recently trimmed their growth forecast for the country, have observed that “India cannot be weakened,” she added.
“So, it will have to again be a very-carefully structured Budget in which growth momentum will have to be sustained,” she said.
India’s growth momentum has been affected in recent months, as a demand slowdown in key markets hit its exports. Even industrial recovery has remained patchy. The escalating Ukraine war and the recent decision of Opec+ to reduce production from November to prop up oil prices pose fresh risks to the Indian economy. A weak rupee, too, has made imports more expensive. Of course, any sharp slowdown in global demand, thanks to the interest rate hikes, will ultimately weigh down commodity prices (most of them have already eased from their peaks this year).
Sitharaman said the government is closely monitoring external headwinds, including elevated commodity prices. But it has made sure that the poor and the vulnerable sections in India are protected from high energy, fertiliser or food prices.
The excise duty on fuel was cut and the government has extended a free ration scheme for the poor by three months through December. It will shell out greater fertiliser subsidy to farmers. The government’s additional spending pledges could cost it Rs 2.6 trillion more than the Budget estimates for this fiscal, mainly on account of food, fuel and LPG subsidy.
“That is one way in which we’re making sure that those of the vulnerable sections don’t get hurt…,” she said. “Empowering is the principle rather than entitlement,” the minister said in response to another question.