Ahead of the upcoming union budget, India is facing a double whammy of rising prices and global slowdown. India’s finance minister Nirmala Sitharaman has promised that the Budget will address the concerns of inflation as well as economic growth. Clearly, these concerns will shape the Budget document in a big way.
Here are the five key concerns which could shape the Union Budget 2023.
1.Rising Prices
Inflation is a big problem not only for citizens like you and me, but also for the government, especially during election season. According to RBI’s estimate, the inflation rate will stay above 6% at least until March 2023. Though limiting inflation is the RBI’s job, government policies also impact prices of goods and services. The government can influence this through revision in taxes, duties and subsidies. This is why fighting inflation could be one of the core focus areas this Budget.
2. Crude Shock
But why is inflation on the rise? A key reason is the increase in crude oil prices.
The Russia-Ukraine conflict has led to a steep increase in crude prices. Currently, the Brent crude price is close to $80 in the global market. And in case you didn’t know, 80% of the crude used in India is imported.
3. Rising Rates
So how can you control prices? The RBI does that by increasing the Repo rate and making money expensive. RBI has till date, increased the repo rate by 2.25%. But this means that the interest on loans has increased and might affect borrowing and consumption.
4. Growth Woes
Supporting growth, however, is as important for the economy as is beating inflation. It is true that India is in a much better place than other economies and the IMF has even called India ‘one bright spot’. But it is equally true that the IMF has reduced India’s growth estimate for FY23 from 7.4% to 6.8%.
The finance minister has clearly mentioned that this slowdown in growth is a major concern for her.
5.Fiscal Deficit
Still, there is a way through which the government can boost consumption and demand. By spending money and making it available to people via different schemes like road, highway, factory construction etc.
But again, just like us, the government has more expenses than income. The economists call it the Fiscal Deficit and right now, it might be about 6.4% of the GDP (whereas the target is 4.5% of the GDP). This means that the government must spend its money wisely.
Therefore, irrespective of whether the budget is for your house or for the country, the concerns are similar - fight inflation, increase the income and spend wisely. So track the union budget, who knows you might stumble across a magic mantra for managing your money!