India’s upcoming budget could assume a nominal gross domestic product growth of about 12.5 percent while the real gross domestic product growth next financial year would around 6.5 percent, according to the chairman of the Economic Advisory Council to the Prime Minister.
“I would be somewhat surprised if the budget assumes a nominal rate of growth of more than about 12.5 percent,” Debroy told Moneycontrol in an interview. He added that despite all the external constraints the economy is facing, “real growth next year will be of the order of 6.5 percent.”
“If one assumes a nominal rate of growth of about 12 percent or thereabouts, the tax revenue growth on an average, depending on what changes are brought about in the budget, would be of the order of 14.5 percent or thereabouts.”
There is no uncertainty within the country as government policies have been designed to curb those, the economist said.
These comments come weeks before Finance Minister Nirmala Sitharaman presents the budget for the next financial year in the parliament. The nominal GDP, or real GDP plus inflation, is a key indicator for the budget making process.
India’s economy is expected to grow 7 percent in real terms in current financial year, lower than the favourable base effect-propelled 8.7 percent a year earlier.
In nominal terms, the GDP is estimated to grow by 15.4 percent this year, higher than the estimate of 11.1 percent made by the finance ministry in the budget.
In recent years, the government’s budget calculations have turned conservative even as volatile economic conditions threaten to upend projections.
This year, the economy has finally recovered from the shock of the pandemic and is seen as a global ‘bright spot’. Tax revenues have also been boosted.
For the next financial year, the tax revenue growth on an average, depending on what changes are brought about in the budget, could be of the order of 14.5, Bibek Debroy told Moneycontrol.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
