The budget 2022 may see nominal GDP growth at 12.8 per cent for fiscal 23, falling short of the economists’ estimates, reported the business daily website– Moneycontrol.
The finance ministry may slash the GDP growth rate in FY23 by 480 basis points from the estimated growth, according to the median of projections by 10 economists polled by Moneycontrol. Analysts growth expectations fall between 11.4 per cent to 14.5 per cent.
India’s GDP is anticipated to rise 17.6 per cent in FY22 in nominal terms, the National Statistical Office (NSO), a branch of the Ministry of Statistics & Programme Implementation, said on January 7.
The Union Budget presentation is slated to be held on February 1.
“I think the budget will assume nominal GDP growth of around 13.5 per cent, given the fact that broad guidance for next year’s real GDP growth is 7.5 per cent,” said Indranil Pan, chief economist at Yes Bank. “You need to add around 5.5-6 per cent of inflation considering Wholesale Price Index inflation continues to be on the relatively higher side.”
GDP of India is likely to grow at 7.6 per cent in FY23 in real terms, according to the Reserve Bank of India’s survey of professional forecasters, released in December.
Nominal GDP growth for the current fiscal, ending on March 31, 2022, is likely to grow 9.2% as per the NSO’s first advance estimate supported by the strong performance by the mining, farm and manufacturing sector outputs.
Inflation in the Consumer Price Index stood at 5.2 per cent in April-December 2021, below 6.2 per cent in FY21, whereas WPI inflation came in at 12.4 per cent. Inflation in the WPI remained 1.3 per cent on average in FY21.
WPI is a gauge that national income aggregates take into consideration to deflate nominal price estimates and find out real price estimates.
The nominal GDP growth estimates are essential for the policymakers as it allows the government to lay down goals, including the fiscal deficit, capital spending, and tax collection.
“We expect (FY22) revenue to surpass budget estimates as strong nominal growth buoyed tax revenue through FY22 and is likely to continue to do so in FY23,” noted Rahul Bajoria, chief India economist at Barclays. “We estimate that overall tax revenue collected by the Central government will surpass budget estimates in FY22 quite considerably. The economy proved resilient through the second Covid wave and, coupled with higher inflation, nominal GDP has surprised to the upside.”
Bajoria estimates that the country’s nominal GDP is likely to grow 13.6 per cent in FY23.
The nominal GDP growth for FY23 is taken as consideration for the year’s budget (2022) as it will show the degree of optimism by the finance ministry.
Besides fiscal 22, only one time in a decade has it happened that the nominal GDP had beat the estimate in the budget.