High, stable growth in medium-term should be Budget 2023 priority: EY

Accounting and consulting company Ernst & Young (EY) has said the upcoming Budget 2023 will be the first ‘normal’ Budget post the Covid pandemic shock. The government must focus on high and stable growth in 2023-24 and the medium term, said the consulting firm.

“Union Budget 2023-24 would be the first normal budget after the COVID-19 shock and amid global geopolitical developments. The priority for the Budget should be to maintain a reasonably high but stable growth in FY24 and in the medium term. Alongside, to establish fiscal credibility, a suitable incremental reduction in the fiscal deficit to GDP ratio is required, taking the government of India towards the FRBM (Fiscal Responsibility and Budget Management) target,” said EY in the economy watch report.

With no base effects, India is likely to experience a normal real GDP growth between 6.5% and 7% in FY24. CPI inflation is likely to be between 5% and 5.5%. While the adverse impact of COVID-19 has almost subsided, both growth and inflation numbers may be affected by the post-COVID-19 global upheavals, including the Russia-Ukraine conflict, which has been accompanied by a global slowdown and significant supply-side bottlenecks, said EY.

“In terms of growth performance in FY23 as well as in FY24, India would remain an exception, as recognised by the IMF and the OECD. The forthcoming Union Budget may aim at laying down a solid foundation for a stable medium-term growth accompanied by a credible redefined fiscal consolidation glide path,” it added.

On the global economic scenario, the report said it is currently beset by high inflation and falling growth. “Advanced countries have already entered a significant economic slowdown. As per the November 2022 OECD projections, global growth is forecasted at 3.1% in 2022, which is nearly half the pace witnessed in 2021. It is expected to fall further to 2.2% in 2023. The majority of the projected slowdown is accounted for by moderating growth rates in the OECD economies that as a group are projected to grow by 2.8% in 2022 and only 0.8% in 2023,” it said.