11% GDP growth need push in spending

The Economic Survey's forecasts of real and nominal GDP growth for FY22 of 11 per cent and 15.4 per cent, respectively, will require a substantial push from central and state government spending.

Private sector capacity expansion announcements are anticipated to be intermittent, and sector-specific in the next couple of quarters. Moreover, private consumption is likely to chart a differentiated recovery across income and age groups, in our view.

Based on the comments made in the Economic Survey, we expect the Union Budget to incorporate a growth in gross tax revenues of 15-16 per cent, which in conjunction with a stiff target for disinvestment proceeds, would allow the Government to project a considerable expansion in spending, especially on capex. The ensuing higher GDP growth would help Union Government finances to revert to a sustainable fiscal trajectory over the medium term.

In line with our estimate that the Government of India will target a fiscal deficit of 5.0% of GDP for FY2022, we peg its gross dated borrowings at Rs 11.7 lakh crore for the coming fiscal.

- Aditi Nayar, principal economist, Icra Ratings