WHAT DOES THIS MEAN FOR GROWTH GOING FORWARD?

Most economists have termed the budget’s revenue and growth projections as conservative, a view which was also expressed by finance minister Nirmala Sitharaman in an interview. However, some have also remarked that the government’s spending targets for what is left of this fiscal year are very ambitious.

“Our back-of-envelope calculations suggest the government’s aggressive spending targets for 2020-21 implies that over January – March quarter, revenue spending would have to escalate by a significant 55% y-o-y, while capex would have to expand by over 60% y-o-y” the Normura India research note said.

“For FY21, the government has assumed 103% y-o-y growth in expenditure in 4QFY21. We think most of it will be on food subsidy (expenditure under the National Food Security Act and procurement of food grains). Alongside, capex is also likely to rise, with a focus on railways (capital acquisition and railways),” Pranjul Bhandari and others at HSBC Securities and Capital Markets (India) Pvt Ltd said in their research note. That may not help. It is progress on capital spending during January, which will be available when the fiscal year comes to an end, which will be a truly useful indicator of the fiscal boost to the economy.