Global FDI fell 42 per cent to $859bn in the COVID impacted year FY 2020 with developing economies seeing a 12 per cent YoY decline while ASEAN countries witnessed 31 per cent YoY contraction at $107bn. Another extended wave could further lead to a decline in investment flow, as per the report.
Amid the impact of COVID-19 on Indians, Prime Minister Narendra Modi led central government through Union Budget 2021-22 is aiming to strengthen the country’s fundamental growth by supporting various sectors, through budgetary allocations and policy support, said the budget expectations FY 2022-23 mentioned the Primus Partners, in its report.
In the budget expectations FY 2022-23 report, Primus Partners recommended a few cross-cutting expectations that will help place India on a rapid growth path and go a long way in securing the country’s long-term future.
The report focuses on sectors such as Defence and Healthcare, PLIs in sectors with export potential, Climate Financing, reforms in the Banking and Energy sector, and the effectiveness of social protection and welfare programmes.
“The declining share of direct taxes in total tax revenue, clearly suggests that the central government should emphasise in the Union Budget 2022-23 on substantially improving the tax revenue. The policies regarding ‘tax effort’ could be designed through various ways such as rationalising tax rates, policies regarding widening the tax base and net, and improving tax compliance and tax administration,” it mentioned in the report.
According to the report, it is expected that against contraction in revenues, an increase in expenditures could collectively revive the aggregate demand in the economy. This could lead to high growth in the near future, henceforth, reducing the fiscal deficit (estimated to be 6.8 per cent in 2021-22) both in absolute terms and as a percentage of GDP.
“In this regard, it is expected that central government would reassess its ministry-wise allocations, and increase spending on social and economic sectors to boost aggregate demand in the economy,” it added.
Talking about the global events impacting India, the report mentioned that inflationary concerns are predominant in major economies. The US Fed has doubled its pace of tapering of its bond purchase program and Europe is also moving towards a higher interest rate scenario, particularly in the UK where November inflation came at a 10-year high of 5.1 per cent.
Global FDI fell 42 per cent to $859bn in the COVID impacted year FY 2020 with developing economies seeing a 12 per cent YoY decline while ASEAN countries witnessed a 31 per cent YoY contraction at $107bn. Another extended wave could further lead to a decline in investment flow, as per the report.
“These are uncertain times with no templatized solutions due to lack of precedence. The Indian government is also cognizant of further complete or partial lockdowns – in which case there might need to be further measures to support the economy, potentially leading to higher inflation again. Hence, there may not be many new scheme announcements in this budget,” it added.
India reportedly imports 85 per cent of its domestic oil requirements. Its oil import bill in FY21 was $62.7bn and FY22 may see a further hardening of oil prices which may not be passed on due to political considerations. “Rising oil import bills coupled with fiscal tapering could potentially lead to a high impact on both the cost and availability of debt. The ability of the government to borrow will hence be impacted as interest rates increase,” it said.
Almost everyone has an eye on the upcoming budget, amid the expectations and financial relief for respective sectors. Also known as the annual financial statement, the union budget is presented by the Centre government every year.