Budget 2023: FY24 nominal GDP growth assumed at 10.5%

FM Nirmala Sitharaman tabled Budget 2023 on February 1

The government has assumed a nominal GDP growth of 10.5 percent for 2023-24, the Budget 2023 presented by Finance Minister Nirmala Sitharaman said.

At 10.5 percent, the nominal GDP growth assumption is in line with economists' expectations.

A Moneycontrol poll had shown that economists expected the Budget 2023-24 to assume a nominal GDP growth of 10.5 percent.

"Nominal GDP for BE 2023-2024 has been projected at Rs 3,01,75,065 crore (Rs 301.75 lakh crore) assuming 10.5 percent growth over the estimated Nominal GDP of Rs 2,73,07,751 crore (Rs 273.08 lakh crore) as per the First Advance Estimates of FY 2022-23," the Budget documents said.

The nominal GDP growth assumption for 2023-24 is one of the most crucial numbers in the Budget as it determines estimates such as the fiscal deficit and the growth in tax collections.

The Centre has benefitted from two years of very high nominal GDP growth, thanks to high inflation and a favourable base. This year, the statistics ministry's first advance estimate put nominal GDP growth at 15.4 percent as against the budget's assumption of 11.1 percent.

The budget does not put out real or inflation-adjusted GDP growth projections. However, the Economic Survey for 2022-23, released on January 31, has forecast a real GDP growth rate of 6.5 percent, in a range of 6-6.8 percent, for the next financial year.

While this would be 50 basis points lower than the current year's growth, economists think it is an optimistic figure and may not be achieved.

One basis point is one-hundredth of a percentage point.Follow our live blog for the latest Budget 2023 updates 

The nominal GDP growth assumed in the Budget is crucial as it can have a knock-on effect on other numbers. For instance, actual nominal GDP growth for 2022-23 exceeding the Budget assumption of 11.1 percent has provided the Centre with more than 30 basis points of room to meet its fiscal deficit target of 6.4 percent of GDP.