Budget 2023: Analysts believe govt likely to maintain growth path keeping fiscal deficit, inflation in check – Details!

Ahead of Budget 2023, the key expectation from Finance Minister Nirmala Sitharaman is to maintain the growth path while keeping fiscal deficit and inflation in check, HDFC Securities said in its report.

Similarly, another domestic brokerage Motilal Oswal believes that the continuation of the improved quality of government spending will be highly welcome.

The upcoming Union Budget scheduled on February 01, 2023, will be the last full year budget from the Modi government ahead of the Lok Sabha elections due in early 2024.

It added, “The Centre is likely to over-achieve its receipts in the financial year 2022-23 (FY23), allowing it to meet higher-than-budgeted spending without breaching its fiscal deficit targets.”

The government wants to achieve a deficit of 4.5 per cent by FY26, HDFC Securities said, adding that to reach there, it must reduce the same to 5.6-5.8 per cent of GDP in FY24 versus 6.4 per cent in FY23.

As the target of paring down the fiscal deficit to 4.5 per cent of GDP by FY26 remains a tall task, a reiteration of this will be assuring, Motilal Oswal stated.

Similarly, a fiscal policy concern that needs to be urgently addressed is the significant compression of capital expenditure in most states, despite the Rs 1 trillion interest-free loan provision for capital expenditure by states, which is exacerbating the growth slowdown, HDFC Securities said.

Tackling slowdown in growth and a rise in Current Account Deficit (CAD) could be the focus areas of the Union Budget. HDFC Securities said.

According to Motilal Oswal, “Even with subdued spending growth, it is very likely that the government can target capital spending at Rs 8.8 trillion in FY24E, up another 17 per cent year-on-year, around 20 per cent of total spending, and rise to around 3 per cent of GDP.”