New Delhi: Credit Suisse’s Neelkanth Mishra shared his expectations for the Union’s 2022-23 budget, which will be presented by Finance Minister Nirmala Sitharaman on Tuesday. Speaking exclusively to ET Now, Mishra explained that India’s policy makers (state and central levels) are changing again.
For most of the previous decade it was fiscal consolidation. Currently, markets are set for larger deficits and expect the center and the state to run large deficits. Tax revenues are also increasing and governments are unable to spend money. Mishra stressed that the biggest variable to track right now is the cash balance that governments hold at the Reserve Bank of India (RBI), which currently accounts for more than 2 percent of GDP. Mishra continued that the functioning of the government has been severely affected by the COVID-induced lockdown scenario in the country.
Speaking of the budget, the key variable to watch for in central and state budgets would be what they plan to spend on and how much they can further increase spending. Also, tax revenues are pretty good and the temptation would be to aggressively consolidate. He also stressed that it is possible to increase normal GDP faster.
According to Mishra, it makes sense to spend a lot more when markets are primed for higher deficits. At the same time, he emphasized that one of the key learnings from last year’s budget was that it was very progressive as it showed the government ways to focus on growth, privatization of PSU banks and several other such moves. He mentioned that even if there are no concrete steps affecting the tax numbers and budget presentations about personal tax or income tax announcements or exemption cancellations, he stated that all these things are being received very positively. However, he stated he wasn’t sure if these things would be enough to offset the global market turmoil but he believed it would help India to fare better.