NEW DELHI: The advance estimates of GDP released by the National Statistical Office (NSO) on Friday will cheer the government on two fronts. Not only it is higher than the nominal GDP growth projected by finance minister Nirmala Sitharaman in the last Budget, but it also provides her with an additional headroom of almost Rs 72,000 crore to stick to the fiscal deficit target for the year.
Assuming a 14.4% nominal growth (without netting out inflation), the FM had estimated the economy to expand to Rs 2,22,87,379 crore. NSO’s advance estimates peg the nominal GDP at Rs 2,32,14,703 crore.
“The estimates serve as an essential input to the upcoming Budget exercise for the next fiscal. An increase in the nominal GDP at 17.6% provides additional expenditure space for the government. As per the nominal GDP estimates, the budgeted fiscal deficit for FY22 works out to be 6.5% of the GDP. Despite the shortfall in disinvestment proceeds and additional demand for supplementary grants, the fiscal deficit target of 6.8% of GDP is likely to be achieved in FY22. The 17.6% increase in nominal GDP also results in a substantial decline in the debt-to-GDP ratio, which is the focus of FRBM,” said M Govinda Rao, chief economist at Brickworks Ratings and a former member of the PM’s Economic Advisory Council.
While disinvestment receipts are expected to be lower than the Budget estimate of Rs 1.75 lakh crore, the tax revenue is likely to be higher than the Rs 17.9 lakh crore that Sitharaman had budgeted for. Direct and indirect tax receipts have been more robust than what her Budget team had assumed, on the back of the strengthening economic recovery and pent-up demand. Even on the non-tax revenue front, the mop-up from the RBI and some of the other sources will make up for the giveaways on telecom.
Assuming a 14.4% nominal growth (without netting out inflation), the FM had estimated the economy to expand to Rs 2,22,87,379 crore. NSO’s advance estimates peg the nominal GDP at Rs 2,32,14,703 crore.
“The estimates serve as an essential input to the upcoming Budget exercise for the next fiscal. An increase in the nominal GDP at 17.6% provides additional expenditure space for the government. As per the nominal GDP estimates, the budgeted fiscal deficit for FY22 works out to be 6.5% of the GDP. Despite the shortfall in disinvestment proceeds and additional demand for supplementary grants, the fiscal deficit target of 6.8% of GDP is likely to be achieved in FY22. The 17.6% increase in nominal GDP also results in a substantial decline in the debt-to-GDP ratio, which is the focus of FRBM,” said M Govinda Rao, chief economist at Brickworks Ratings and a former member of the PM’s Economic Advisory Council.
While disinvestment receipts are expected to be lower than the Budget estimate of Rs 1.75 lakh crore, the tax revenue is likely to be higher than the Rs 17.9 lakh crore that Sitharaman had budgeted for. Direct and indirect tax receipts have been more robust than what her Budget team had assumed, on the back of the strengthening economic recovery and pent-up demand. Even on the non-tax revenue front, the mop-up from the RBI and some of the other sources will make up for the giveaways on telecom.
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