Ojaank IAS Academy

OJAANK IAS ACADEMY

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OJAANK IAS ACADEMY

Balance Fiscal Consolidation with Growth

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The fiscal policy of the government is to increase the amount of money that the government can spend. The government finance or policy known as Budgeting policy or fiscal policy is used to produce income and increase spending.

Public Expenditure, Taxation, and Public Borrowing are the three key fiscal metrics. The economic situation of India: Although India performed better than many other countries, the return to normalcy has been delayed. India’s GDP will be 57(eight point five seven)% higher by the conclusion of the current fiscal year than it was in 2019-20, for a three-year average of 2.86%.

Gross Value Added (GVA) in Real Terms (2002-23): It is expected to expand by 7 (six point seven) percent. Sectoral breakdown shows that every production sector has become positive in comparison to the equivalent magnitudes in the 2019-20 pre-COVID-19 year. GDP nominal (2023-24): It might be close to Rs 300 lakh crore.

According to preliminary forecasts, real growth in the second half of 2022-23 will be barely 5%. The policy reaction to the shock of COVID-19: The budget deficit of the Centre increased dramatically to 2(nine and two)% of GDP.

More than three times the initial FRBM guideline of 3%. Fiscal deficit: The fiscal deficit might be decreased to 7(six point seven)% and 6.4(six point four)% in the two following years.

The Organization for Economic Cooperation and Development (OECD) predicts that the world economy will increase at a pace of 2% in 2023. India: 5.7 (five and seven) percent in 2023-24.

The International Monetary Fund estimates global growth at 2.7 percent. India’s GDP growth rate is 1%. India may be able to reach 6-6.5 (six point five)% growth in 2023-24 if considerable governmental support is given to growth.

Growth in the Centre’s Gross Tax Revenues (GTR) would be lower in 2023-24 than in 2022-23. Because of a predicted reduction in both real GDP growth and deflator-based inflation. Together with non-tax income and non-debt capital receipts, the Central government’s total resources would be close to 28.3 (twenty-eight point three) lakh crore.

With 2023-24 being the first true post COVID-19 normal year: It would be desirable to set out a credible route towards the required budget deficit ratio of 3%.

This entails a total GDP adjustment of 3.4 (three and four) percentage points. Because of the relative profile of savings and investment as a fraction of GDP, the government’s fiscal deficit must be corrected. The quantity of surplus available for prospective net deficit sectors in the economy is determined by financial savings and net inflows of foreign capital.

Reduce the fiscal deficit by 0.7 (zero point seven) percentage point in 2023-24 compared to 2022-23. The resulting fiscal deficit of 7% of GDP implies an availability of investible resources of 1.1 % of GDP for both the private business sector and the non-government public sector.

Financed by household sector financial savings of around 8% of GDP and net inflow of foreign capital of 3% of GDP. It will not put extra downward pressure on interest rates. It would be perfect for sustaining strong medium-term growth while maintaining price stability.

Maintaining price stability requires reducing the fiscal deficit and planning a glide path. The Reserve Bank of India (RBI) will have less pressure to grow reserve money. Limiting revenue spending growth would require careful calibration in order to leave room for capital expenditure to expand enough in order to support growth.


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