Budget 2023 to focus on growth, inflation concerns, says FM Sitharaman

Expressing optimism about India's relative and absolute growth performance in the coming years, Union finance minister Nirmala Sitharaman on Tuesday said the Indian economy may grow around 7 per cent next fiscal, adding that the next Union budget will have to be “carefully structured" to sustain growth and contain inflation. She noted that India's biggest concern is the high energy prices in the near future. 

As economies worldwide face the twin challenges of high inflation and slowing economic growth amid monetary policy tightening and a decline in global demand, Sitharaman said India was watchful of the situation. 

She was speaking at a fire-side chat with eminent economist Eshwar Prasad at the Brookings Institute. The minister is in Washington DC to attend the annual meetings of the International Monetary Fund and World Bank.  

Focus on Budget 2023 

Speaking about the upcoming budget in 2023, the minister said that inflation concerns have to be addressed on priority. Inflation has hovered above the tolerance limit of 6 per cent for most of 2022, prompting the Reserve Bank of India to raise interest rates to dampen demand.  

Besides, Russia’s war in Ukraine has sent oil and gas prices spiralling and raised concerns of slowing down India’s economic recovery. The weakening of the rupee has added to the woes as it raises the cost of imports. India is 85 per cent dependent on imports to meet its oil needs and roughly half of its gas requirement. 

“Specifics (of the next budget) may be difficult at this stage because it’s a bit too early. But broadly, the growth priorities will be kept absolutely on the top. Even as I speak about the concerns that inflation brings before me. So, inflation concerns will have to be addressed. But then how would you manage growth would be the natural question,” Sitharaman said.  

The minister is scheduled to present the annual budget for the fiscal starting April 2023 on February 1 next year. 

The government’s last two budgets focused on capex-led growth while adhering to a glide path for fiscal deficit. The minister said that 2020 and 2021 saw a rise in borrowing on the Centre and states’ behalf (to fund GST compensation), but the government has been transparent about its deficit. The Centre has estimated a fiscal deficit of 6.4 per cent of GDP for FY23, from 6.7 per cent last year. 
Last month, the central bank cut its projection of India’s GDP growth in the current fiscal to 7 per cent from 7.2 per cent previously estimated. Other rating agencies, too, have lowered the economic growth projection for India, citing the impact of geopolitical tensions, tightening global financial conditions and slowing external demand. 

On this, Sitharaman said the global stress that hits India — energy, fertiliser or food — “all of this we are carefully watchful and making sure that stress doesn’t get passed on to the people”. The excise duty on fuel was brought down so that the common citizen doesn’t bear the brunt of increasing fuel prices. “That is one way in which we’re making sure that those of the vulnerable sections don’t get hurt,” she said. 

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(With agency inputs)