Slower GDP growth may hit spending
New Delhi: A likely expansion of the economy at slower than the estimated rate of 10.5% in nominal terms this year could make it harder for the government to realize tax revenue targets for FY24, putting pressure on spending in coming months, according to experts. The wholesale price index (WPI)-based inflation, which is in the negative territory, could mean India’s gross domestic product (GDP) growth rate without adjusting for inflation may be a little more than 9% in FY24, below the budget estimates, experts said. This would necessitate re-prioritizing the spending programme to make sure funds flow to the highest priority items so that the fiscal deficit target can be achieved, experts said.
The government has in the past years put the brakes on non-priority spending in the final months of the financial year to maintain its fiscal credibility. The total spending estimate for FY24 is ₹45 trillion, close to a third of which is effective capital expenditure. The trend so far this year is the opposite of the last financial year when a better-than-anticipated nominal GDP growth rate boosted revenue and helped the government limit the fiscal deficit at 6.4% of the GDP.
To be sure, in absolute terms, it had overshot the estimate by over ₹94,000 crore. WPI-based inflation, used in computing nominal GDP, has been negative since April. Devendra Pant, chief economist, India Ratings and Research, said that many were expecting that WPI deflation will make way for some marginal positive WPI inflation by September but this has not happened yet.
Read more on livemint.com
