Economy's health is good but the common man misses "the feel-good" factor

                               

GDP growth projections by Global Institutions of Advanced Economies and Emerging Market Economies including India are given in Table 1 herein below:

Table 1:

The above chart indicates that the GDP growth of Indian economy in Calendar year 2023 has  been revised upwards by OECD from 5.7% to 6% and downwards by World Bank from 6.6% in Jan 2023 to 6.3% in June 2023. The convergence is between 6-6.3% with RBI and Department of Economic Affairs of Ministry of Finance are projecting 6.5% growth in FY2024 with risks evenly balanced.IMF is projecting at below 6% .However all these forecasts are showing slowdown from the growth attained in the last two fiscal years at 9.1% in FY22 and 7.2% in FY23.

 Table 2:Key Fiscal Indicators (as a  per cent of GDP)

  

Indicator	2021-22	2022-23			2023-24
	Actuals	BE	RE	PA	BE
1. Fiscal Deficit	6.75	6.44	6.43	6.36	5.92
2. Revenue Deficit	4.39	3.84	4.07	3.92	2.88
3. Primary Deficit	3.32	2.79	2.98	2.95	2.34
4. Gross Tax Revenue	11.54	10.69	11.14	11.21	11.14
5. Non-Tax Revenue	1.56	1.05	0.96	1.05	1.00
5. Revenue Expenditure	13.64	12.38	12.67	12.67	11.61
6. Capital Expenditure	2.53	2.91	2.67	2.70	3.32
(i) Capital Outlay	2.28	2.37	2.27	2.28	2.77

Notes: 1. GDP used for 2022-23 budget estimates (BE) and revised estimates (RE) is as per the Union Budget 2022-23 and 2023-24, respectively.

2. For 2022-23 (PA), the GDP used is the provisional estimates (PE), released by the Ministry of Statistics and Programme Implementation (MoSPI) on May 31, 2023.

Sources: Union Budget Documents; and Controller General of Accounts (CGA).

Table 3: Key Fiscal Indicators (as a per cent of GDP/GSDP)

Indicator	2021-22 Actuals	2022-23			2023-24 BE
		BE	RE	PA
Gross Fiscal Deficit	2.8	3.4	3.1	2.8	3.2
Revenue Deficit	0.4	0.3	0.5	0.3	0.2
Primary Deficit	1.0	1.6	1.4	1.2	1.4
Tax Revenue	10.0	10.1	9.3	9.8	10.6
Non-Tax Revenue	1.1	1.3	1.0	1.0	1.2
Revenue Expenditure	14.2	15.3	13.7	13.5	14.6
Capital Expenditure	2.5	3.2	2.7	2.5	3.2
i) Capital Outlay	2.3	2.9	2.4	2.2	2.9

Note: Data for 2021-22, 2022-23 (BE) and 2022-23(PA) pertain to 31 States/ UTs and for 2022- 23 (RE) and 2023-24 (BE) pertain to 29 States/UTs. Data for 2023-24(BE) is taken as a per cent of GSDP.

Source: Budget documents of the states; Comptroller and Auditor General of India and RBI.

 

Table 2 and Table 3 indicate the fiscal health of Indian Economy as per Central Govt

and State Governments perspective. Fiscal Deficit is getting reined in at the Central 

and the States level also. The combined Fiscal Deficit is at 6.36%+2.8% i.e 9.16% .

The trajectory of this combined Fiscal deficit is showing a downward slope and this 

is important for the Economy to grow steadily with the percolation of its benefits 

to large sections of the population.

More than this, the inflation trajectory should also come down swiftly since Inflation 

is also an additional tax burden in the hands of the common man. 

Considering the Revenue buoyancy of the Central Govt.it should look at avenues to 

bring down the Excise burden on the Fossil Fuels and domestic LPG as a relief to the 

common man.The cascading effects of fossil fuel price increases will have to be

tamed by this step

GOI must also look at leaving more money in the hands of common man to prime

up Private consumption which contributes to the bulk of our GDP growth i.e almost 

55-60% of GDP.Only then the virtuous cycle of consumption and private investments

kicking in with a fervour can happen in the Economy.

Despite all the chest thumping by the Govt still 'the feel-good factor" is lacking in 

the economy.

(Courtesy:RBI'smonthly bulletin June 2023)

Reduce "GDP" for "Acche-din" feel-good factor!!

 Private consumption is the spending of households and individuals on consumption of goods and services.Private consumption in India during FY22-23 rebounded in India due to two reasons-1)one is due to the "pent-up" demand after the pandemic years of suppressed private consumption ;2) The increase in private consumption  during FY22-23 signals that households have more disposable income in their hand which in turn drives economic growth.

Private consumption expenditure which comprises 61 per cent of the GDP estimates, grew by 7.5 per cent during FY22-23, higher than the pre-pandemic five-year average of 6.9 per cent.But the worrying point is that the private consumption growth was weak at 2.8% (YOY)in Q4 of FY22-23.

Since private consumption accounts for approx 58-61% of GDP, Govt's policies must support them by enabling the households to have more disposable income in their hands.For that to happen, GOI will have to work on two pronged strategy 1)look at avenues for incomes to increase but this may not yield results quickly;2) look at reducing expenses for the households which can provide quick boost to the disposable income in their hands.

Inorder to enabling reduction of household expenses GOI must look at low hanging fruits and that is reduction of GDP i.e Gas(domestic subsidised LPG), Diesel and Petrol !!

This immediate reduction can provide significant momemtum to the increase in Private consumption and also bring down Inflation levels quickly as Fuels have higher rubbing off effect on all areas of the cost to the economy.It can assuage inflation expectations across all sectors of the economy and can push the private consumption levels.

More than this, this reduction of GDP prices will bring in "Acche-din" feel-good factor back to the households