© Reuters. A cashier checks Indian rupee notes inside a room at a fuel station in Ahmedabad, India, September 20, 2018. REUTERS/Amit Dave/Files
By Vivek Mishra
BENGALURU (Reuters) – The Indian government will meet its deficit target for next financial year, according to a Reuters poll of economists on whether New Delhi has done it all. capital expenditures they are planning or not, the most ever.
Since taking office in 2014, Prime Minister Narendra Modi’s government has generally been consistent with its debt targets but has been harshly criticized for not creating enough jobs, especially for young people.
Of the 39 economists who responded, 34 said the government could meet Finance Minister Nirmala Sitaraman’s borrowing target for fiscal year 2023/24 of 5.9% of gross domestic product (GDP). This would be down from the 6.4% expected for the current financial year, which ended March 31.
The government’s main goal is to reduce the budget deficit to 4.5% of GDP by 2025/26. Respondents were split on whether it would be successful.
The government also announced on 1 February a record capital expenditure plan of 10 trillion Indian rupees ($120 billion) for the upcoming financial year, more than the 8.85 trillion expected in a year. Reuters poll ahead of budget.
But only half of 38 respondents to a February 1-3 poll said the government would meet that spending target. Among those who say that won’t happen, some say the economy will slow as a series of rate hikes in 2022 are implemented and limit the government’s ability to spend.
“Are the budget numbers too optimistic? On the margins, we think yes. We expect growth to slow significantly in fiscal year 2023/24…(this) means tax revenue is likely to be disappointing,” said Sonal Varma, chief economist for India and Asia beyond Japan at Nomura.
“The government can still hit the deficit target of 5.9%, but will have to cut the projected capital investment target.”
Over the past three years, New Delhi has nearly doubled capital spending. But it has fallen short of its budget investment target four times in the past nine years and looks set to fall short of this fiscal’s target of 7.5 trillion rupees.
This is believed to have boosted employment, but there is little indication that increased public capital spending spurred a consistent increase from the private sector.
When asked if the measures announced in the budget would have a significant effect on job creation in the next financial year, 26 out of 37 respondents said the measure would affect, but the majority will depend on how they are implemented.
Another 11 said the government was far from having a significant effect on employment.
“The job creation doesn’t seem to be on the scale it should be,” said Kunal Kundu, India economist at Societe Generale (OTC:).
“The strain on the labor market is very obvious, because even though the labor force participation rate is much lower, we still have a fairly high unemployment rate,” said Kundu.
The unemployment rate was 7.14% in January, according to the Center for Economic Monitoring of India, a think tank.
($1 = 82.2060 Indian rupees)
