Budget 2022: Finance Minister Nirmala Sitharaman will present the fourth budget of the second task of the Modi government in just a few days. Amid the slowdown in recovery due to the Omicron variant, the government will have the crucial responsibility of getting the economy out of trouble.
The IMF has slashed India’s growth forecast for the current fiscal year 2021-22 to 9%. Even before the IMF, many agencies have reduced their growth rate estimates due to the impact on business activities and traffic due to the Omicron variant. In its latest estimate, the IMF has said that the Indian economy will grow at the rate of 7.1 percent in the next financial year 2022-23.
Government can increase capital spending
The government is expected to increase capital spending in this budget, which will have a good impact on the entire economy. This will help in increasing private investment and boost job creation. This view matches those of IMF’s first deputy managing director Gita Gopinath, who expects the government to continue with the asset monetization program as well as infrastructure investments.
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There should be enough funding for the rural employment guarantee scheme
Besides, the budget may focus on the sluggish pace of economic recovery. In an interview to BloombergQuint, Gopinath said the government should address the uneven recovery by ensuring adequate funding for the rural employment guarantee scheme in the budget and free food grains even after March. The government has extended the free food grains scheme, Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), till March 2022. He expects the government to put more emphasis on health spending and increase spending on education.
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Government should give a reliable target of fiscal deficit
Gopinath said the government should provide a credible medium-term target of fiscal deficit, which will help keep financing costs low at a time when developed countries like the US are set to raise interest rates.
He cautioned that geopolitical tensions coupled with interest rate hikes in the US could push energy prices up, which could cause problems for emerging economies like India.
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