Union Finance Minister Nirmala Sitharaman speaks during a press conference on the Union Budget 2023-24, in Jaipur on February 20, 2023. | Photo credit: PTI
Measures such as increased capital spending, boosting the green economy and initiatives to strengthen financial markets announced in the 2023-24 budget should support job creation and stimulate economic growth, said Thursday the Ministry of Finance.
In its monthly economic review, the department said that in the December 2022 quarter, various high-frequency indicators (HFIs) pointed to a general slowdown as monetary tightening appeared to have started to weaken global demand.
“This could continue into 2023 as various agencies have forecast lower global growth. Besides the lagged impact of monetary tightening, uncertainties stemming from the lingering pandemic and ongoing conflicts in Europe could further dampen global growth,” he noted.
Even though global output is expected to slow, the IMF and World Bank forecast India to be the fastest growing major economy in 2023.
“As in 2022-23, India is entering the coming financial year with confidence in underlying and global macroeconomic stability while alert to geopolitical and geoeconomic risks,” the monthly review said.
The 2022-23 economic study, tabled in Parliament ahead of the budget, had projected a growth rate of 6.5% for FY24, but with more downside risks than upside, it said. he adds.
“Inflation risks are likely to be lower for India in FY24. Yet they will not have disappeared as global conditions, such as geopolitical conflicts and supply disruptions that have result that contributed to higher inflation in 2022, are still present,” he said.
Forecasts of a return of El Nino conditions in the Pacific could portend a weaker monsoon in India, leading to lower production and higher prices. Similarly, as with prices, external deficits may be less of a challenge in FY24 than in FY23, but close attention to trends in international trade and capital flows will be warranted.
The 2023-24 budget once again provided a capex stimulus for growth by increasing the Centre’s capex budget to ₹10 lakh crore – 33% more than the previous year.
“In doing so, the government continues its push for investment-led growth amid global headwinds… Measures announced in the Union budget for FY24, such as increased spending capital, increased focus on infrastructure development, boosting the green economy, and initiatives to strengthen financial markets, etc., are expected to foster job creation and boost economic growth,” he said. -he declares.
The FY24 budget also announced measures to increase consumer spending and demand. These include the streamlining of tax brackets and an increase in the basic exemption limit from ₹2.5 lakh to ₹3 lakh under the new personal income tax regime (NPITR).
“The Union budget further introduced important process measures, such as the creation of the National Financial Information Registry, the implementation of a one-stop-shop system and reforms in the governance of the property tax, among others.
“These will improve processes in the financial market and, in turn, enable regulators to create a more effective feedback mechanism to review regulations,” the ministry’s monthly review report said.
The measures announced in the Union Budget for FY24 will support the growth momentum that has characterized the Indian economy during the current year while helping to address inflationary pressures. Even though Consumer Price Index (CPI) inflation reached 6.5% in January 2023, headline inflation in India showed a downward trend in the second half of FY22, he added.
The measures announced for the MSME sector will likely reduce the cost of funds and help small businesses. The revision of tax brackets under the new personal income tax regime is expected to stimulate consumption, thus giving a new impetus to economic growth. Easier KYC standards, the expansion of DigiLocker services, and the overall push for last-mile digitization and connectivity are expected to bolster financial markets, according to the report.
“With the focus on macroeconomic stability over the past few years, the Indian economy is approaching the coming year with confidence while being aware of the risks,” he added.