India, which is the fastest growing large economy in the world, has now set its sights on becoming a $ 7 trillion economy by 2030. Given the Centre’s focus on Capex-led growth strategy in the last few years, the economy is well on course to achieve the $ 5 trillion mark by 2026-2027, going by the latest Finance Ministry report on ‘Indian Economy: A Review”.
With the Finance Minister Nirmala Sitharaman slated to present her sixth consecutive budget —equalling a record set by former Prime Minister Morarji Desai— there is tremendous excitement and high expectations on how the budget (albeit a Vote on Account) will bring cheers to the country’s women, youth, poor, farmers and the middle class. BusinessLine spoke to Upasana Bhardwaj, Chief Economist, Kotak Mahindra Bank, to get her perspective on what’s in store from the interim budget for various stakeholders including foreign investors. One clear takeaway from the conversation with Upasna is that the aspiration of $ 7 trillion economy by 2030 is achievable given that dollar denominated growth of Indian economy over the last six years has been over 7 percent. “I think a CAGR of 7% plus in dollar terms for next six years is doable and somewhere close to $ 7 trillion can be achieved”. The stage is set, foundation has been laid and over last six to seven years a lot of remedial measures has been taken to address the various weaknesses in the economy, she noted. Upasna expects interim budget to present a strong message on government’s commitment to adhere to its fiscal consolidation commitment. It may even be a bit aggressive in pegging the fiscal deficit target for 2024-25 at a level below the anticipated 5.4 percent. As for the current fiscal, the Centre will stick to its earlier announced target rate of 5.9 percent and this may sound music to the ears of investing community. After India’s inclusion in global bond indices, it has become much more important to be fiscally prudent. It gives India less headroom to be relaxed on that front given that foreign investors will now be viewing fiscal parameters closely, according to Upasna. India’s fiscal deficit consolidation strategy for 2024-35 would be led by pruning of expenditure and toning down of growth in Capex for next year. If you look at India’s macro fundamentals, apart from fiscal deficit, every other metric is a shining star. It’s only debt to gdp ratio and fiscal deficit that are on weak spots. It is something that government will focus attention on and therefore the expectation is to peg the fiscal deficit target at 5.4 percent or below that. “I do believe expenditure pruning is important piece of fiscal consolidation strategy given the lower tax buoyancy this year (2023-24) as compared to last year”. Listen in to the BL State of Economy Podcast with Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank.
(Host: KR Srivats, Producer: Nabodita Ganguly)
About the State of the Economy Podcast
India’s economy has been hailed as a bright spot amid the general gloom that seems to have enveloped the rest of the world. But several sectors continue to stutter even as others seem set to fire on all cylinders. To help you make sense of the bundle of contradictions that the country is, businessline brings you podcasts with experts ranging from finance and marketing to technology and start-ups.