STANCHART SEES INDIA CHARTING COURSE TO A TIGHTER BUDGET
India will seek to narrow its budget deficit next financial year, amid expectations of improved revenue collections and economic rebound, according to Standard Chartered Bank Plc.
Finance minister Nirmala Sitharaman will likely target fiscal deficit - the gap between income and expenditure -- at 5.3 per cent of gross domestic product in the budget for the year starting April 1, the bank's chief South Asia economist Anubhuti Sahay wrote in a report to clients. That will be slimmer than the current year's number, which Standard Chartered expects to be 6.7 per cent of GDP, or even as high as 8.4 per cent if factoring in offbudget spending to help the economy shake off the pandemic fallout.
Although the government announced stimulus steps worth 15 per cent of GDP in the current year, the actual fiscal cost is seen at less than 2 per cent of GDP with most of the measures taking the form of loan guarantees. That compares with direct spending of about 3 per cent of GDP on average in other emerging markets, according to S&P Global Ratings.
The gains will be "driven by improved tax collection, higher divestment proceeds and reduced pandemic-related expenditure amid a better growth environment," Sahay said. "The fiscal consolidation path for FY22-26 will be keenly watched to assess medium-term market impact," she said.
Sitharaman, in an interview in December, said she would carefully balance her next budget to ensure the momentum in the economy isn't lost.