Ahead of Budget 2023, international financial management firm Goldman Sachs has projected that India would trim its fiscal deficit aim for the financial year 2023-24 by 50 basis points, reported Bloomberg. According to the report, Goldman Sachs Group Inc on Tuesday said that India will consolidate its fiscal deficit to 5.9 per cent of GDP as it balances spending priorities and fiscal prudence in the upcoming Budget.
This reduction will be backed by a decline in food and fertilizer subsidies, the report said. Goldman Sachs said that the withdrawal of the free food plan will likely reduce the subsidy bill to 0.8 per cent of GDP, while fertilizer subsidy will reduce to 0.5 per cent of GDP.
The government estimated a fiscal deficit of 6.4 per cent of GDP in the fiscal year ending March 2023. It was significantly down from the 9.2 per cent fiscal deficit for the fiscal year 2020-21, the year when the economy was hit by the pandemic.
The government aims to bring this below 4.5 per cent of GDP by 2025-26. In her speech, while presenting Budget 2022 the Finance Ministry Nirmala Sitharaman said, “the Fiscal Deficit in 2022-23 is estimated at 6.4 per cent of GDP, which is consistent with the broad path of fiscal consolidation announced by me last year to reach a fiscal deficit level below 4.5 per cent by 2025-26.”
Goldman Sachs economists wrote, “Rural employment and housing are likely to be in focus.”
Also Read: Budget Glossary: 10 Terms You Should Know Ahead Of Budget 2023
“We expect government borrowing in FY24 to remain elevated, which will likely require the Reserve Bank of India to re-start OMO purchases in the second half of FY24 with domestic liquidity constraints abating,” they wrote, referring to the central bank’s open market operations.
The report added that the overall tax receipts for FY24 are seen lower due to a fall in excise collections and windfall taxes.