New Delhi, February 01, 2022: The positive surprise on the fisc for FY22 did not happen – the upside on tax collections, especially corporate and oil taxes, were mitigated by lower disinvestment proceeds (a gap of ~1 lac crores) and some expansion in expenditure. As a result, the positive surprise that was widely expected in the fisc didn’t materialize. Next year’s numbers though have been pegged at fairly modest level. Total budgeted expenditure is up <5% (over Revised Estimates for FY22), total revenue receipts are also budgeted at a modest 6% growth. Add to it the very modest expectation of GDP growth (~11% nominal), and there seems to be headroom on both revenue and expenditure side later in the year for the government to intervene.
But, and it’s a sizeable but, a lot depends on global oil prices. Almost a third of the excess (over budget) tax collections this year were on account of oil taxes. Oil, if it goes to $120-130 will put pressure on the extraordinary excise/customs duties on oil, unless the government is able to pass on another 30-40% increase in the pump price of diesel/petrol. With inflation raising its head on multiple counters, it will be a tough act to pull through.
In terms of economic impact, it’s a work-in-progress. The flat revenue expenditure budgeted is almost certain to be revisited in the middle of the year – especially allocations for key social expenditure like PM-KISAN, NREGA and subsidies. 25% rise in capex budget is good, but heavily dependent on government’s execution capacities.
Bond markets should be wary, as they have shown in bond prices – the positive surprise on the fisc didn’t materialize for this year and the next year doesn’t seem fully baked (even though based on conservative assumptions). Solid Budget – from a “Budget” perspective, continuing the process of cleaner transparent budget exercise. Any flashes or big bangs will have to wait for how inflation pans out in the next few months.
Corporate Comm India (CCI Newswire)
