Budget 2023 Expectations: Nominal GDP growth rate may be pegged at 11% on export slowdown

Finance Minister Nirmala Sitharaman will present Budget 2023 on February 1.

India may estimate its nominal gross domestic product (GDP) growth rate at 11 percent in the Union Budget next week, news agency Reuters reported citing unidentified government officials.

This marks a slowdown from its estimate for the current fiscal year in anticipation of weak exports.

Budget 2023: Nominal GDP growth

Nominal GDP growth, which includes inflation and is the benchmark used to estimate tax collections, could be pressured by suppressed external demand next year due to a likely US recession, according to the report.

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The government expects the nominal growth at 15.4 percent for the current fiscal year that ends on March 31.

"The biggest risk to these estimates is the interest rate hikes by the US Federal Reserve, which is expected to tip their economy into recession, hurting India's exports," one of the officials said.

The official said that a fall in exports and a continued rise in imports to support domestic consumption would lead to a widening current account deficit (CAD).

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India's CAD was 4.4 percent of GDP in the July-September quarter, higher than 2.2 percent a quarter ago and 1.3 percent a year ago, as rising commodity prices and a weak rupee widened the trade gap.

Budget 2023: Real GDP growth

The real GDP growth is expected to be pegged at 6-6.5 percent in the Economic Survey of 2022-23, one of the officials said. The second official said it would be under 7 percent.

The Economic Survey is the government's review of how the economy fared in the past year and precedes the budget presentation by a day. The budget will be tabled in Parliament on February 1.

India aims to achieve a fiscal deficit of 4.5 percent of GDP by 2025-26. The current year's fiscal deficit target is pegged at 6.4 percent.

However, India remains a relative "bright spot" in the world economy but needs to leverage its existing strength in services exports and extend it to its job-rich manufacturing exports, the International Monetary Fund (IMF) said earlier this month.

With inputs from agencies