3 Min(s) Read
By Sonal Sachdev Feb 1, 2023 7:31:22 PM IST (Updated)
The big boost to capital expenditure to over Rs 10 lakh crore (effective capex of Rs 13.7 lakh crore including grants) from a little over Rs 7 lakh crore estimated for the current fiscal is a clear positive. And this should have multiplier effects.
If you were fearing a big populist splurge in the budget ahead of the elections, you would be relieved. Finance Minister Nirmala Sitharaman has delivered on the fiscal deficit expectations and reiterated her commitment to the fiscal path.
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The big boost to capital expenditure to over Rs 10 lakh crore (effective capex of Rs 13.7 lakh crore including grants) from a little over Rs 7 lakh crore estimated for the current fiscal is a clear positive. And this should have multiplier effects.
What prompted this big thrust? It could be concerns about the external environment and the need to offset these pressures with domestic growth drivers. What big spending could also do is drive growth up a tad.
The budget estimates nominal GDP growth at 10.5 percent in FY24, and this is necessary to keep tax receipts buoyant. To give you a sense, net tax revenue is expected to grow 11.7 percent in the next fiscal, and a shortfall in this trajectory could push up the fiscal deficit.
That’s the very good bit, so far as the budget math goes.
THE WORRY AREAS
A significant part of the additional capex is being funded by a sharp reduction in subsidies and any miss on this part can upset the apple cart. The other surprising element is the sticking with a near Rs 60,000 crore divestment target next year (vs Rs 60,000 crore estimated for the current year—also a likely challenge).
What assets is the Government going to divest to meet these divestment targets and will the deals be closed within the fiscal are the key questions here.
The other significant contributor is non-tax revenue, which is up near Rs 40,000 crore. Within this, a key contributor is telecom. The “other communication services” accounting head that usually captures receipts from license fees and AGR has seen a jump of over Rs 20,000 crore in the year. Besides this, there is also an expectation of higher dividends from state enterprises and the RBI.
A closer look at the fine print over the next few days will likely reveal the real feasibility of these incremental revenues and their implications. For now, though, a few receipt expectations do seem a tad optimistic.
THE BUDGET MATH | ||||||||
Particulars | BUDGET ESTIMATES | BUDGET NUMBERS | ||||||
Amounts in Rs cr | 2022-23BE | 2022-23EST | 2023-24EST | 2022-23RE | 2023-24BE | RE v BE (23) | BE vs Est (24) | FY24 v FY23 |
TOTAL RECEIPTS | 3944909 | 2455117 | 2697800 | 4187232 | 4503097 | 6.1 | 66.9 | 7.5 |
Revenue Receipts | 2204422 | 2399983 | 2629600 | 2348413 | 2632281 | 6.5 | 0.1 | 12.1 |
Net Tax Revenue | 1934771 | 2144150 | 2349567 | 2086662 | 2330631 | 7.9 | -0.8 | 11.7 |
Non Tax Revenue | 269651 | 255850 | 280033 | 261751 | 301650 | -2.9 | 7.7 | 15.2 |
Capial Receipts | 1740487 | 54800 | 64650 | 83500 | 84000 | 5.6 | 2793.8 | 1.7 |
Recovery of Loans | 14291 | 14300 | 14650 | 23500 | 23000 | 64.4 | 57.0 | -2.1 |
Other (Disinvestment) | 65000 | 39900 | 51667 | 60000 | 61000 | -7.7 | 18.1 | 1.7 |
Borrowings & Other Liabilities | 1661196 | 1755700 | 1771617 | 1755319 | 1786816 | 5.7 | 0.9 | 1.8 |
Net Market Borrowings | 1118612.44 | 1142167 | 1199867 | 1195866 | 1230911 | 6.9 | 2.6 | 2.9 |
TOTAL EXPENDITURE | 3944909 | 4210833 | 4469417 | 4187232 | 4503097 | 6.1 | 0.8 | 7.5 |
Revenue Expenditure | 3194663 | 3462040 | 3646780 | 3458959 | 3502136 | 8.3 | -4.0 | 1.2 |
Interest Payments | 940651 | 960200 | 1070840 | 940651 | 1079971 | 0.0 | 0.9 | 14.8 |
Grants in Aid for Capex | 317643 | 0 | 0 | 325588 | 369988 | 2.5 | 13.6 | |
Capital Expenditure | 750246 | 752650 | 850417 | 728274 | 1000961 | -2.9 | 17.7 | 37.4 |
REVENUE DEFICIT (RR-RE) | 990241 | 1051125 | 1003200 | 1110546 | 869855 | 12.1 | -13.3 | -21.7 |
Revenue Deficit (% of GDP) | 4 | 3 | 4.1 | 2.9 | -12.7 | -29.3 | ||
FISCAL DEFICIT (TR-BRW-TE) | 1661196 | 1755700 | 1771617 | 1755319 | 1786816 | 5.7 | 0.9 | 1.8 |
Fiscal Deficit (% of GDP) | 6.4 | 6 | 6 | 6.4 | 5.9 | 0.0 | 0.8 | -7.8 |
GDP ESTIMATE | 25800000 | 27336611 | 30203189 | 27307751 | 30175065 | 5.8 | -0.1 | 10.5 |
GDP Growth Estimate (% YoY) | 11.1 | 16 | 10 | 17.6 | 10.5 | 58.8 | 0.1 | -40.4 |
CUES FOR THE MARKET
For equity investors, this should well go down as a growth Budget if there ever was one. Trimming of revenue deficit and expansion of capital expenditure will find few critiques. India Inc should not have too much to complain too much either, least of all players in infrastructure and railways servicing sectors.
For the sake of investors and the markets, we do hope that Finance Minister Nirmala Sitharaman can find the resources to execute her capex plans.
First Published: Feb 1, 2023 7:30 PM IST
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