Budget needs to focus on demand growth, PLI, Infra: Deloitte

In its pre-budget expectations, Deloitte India has called for measures towards sustainable growth in demand, production linked incentives (PLI), and infrastructure. Expecting that India’s GDP growth will maintain a “reasonable growth momentum” compared with the beginning of the year, Deloitte has emphasized on the need to prepare in advance for the incoming global slowdown next year.

Deloitte says the budget needs to lay emphasis on sustainable growth in demand, which will require efforts to create jobs and increase income generation opportunities. “India is a domestic demand-driven economy, and so far, recovery in consumer spending has not been sustainable. The suggested move will put more money in consumers’ wallets,” said economist Rumki Majumdar in Deloitte’s pre – budget expectations.

In the context of the incoming slowdown, one of the key asks of the agency is to prepare for a global slowdown and focus on sectors that can make India an attractive investment destination. 

“The Production Linked Incentive (PLI) scheme and infrastructure plan are a success and with the national logistics policy, there will be a substantial reduction in production cost. The government must focus on fast completion of projects and efficient execution of initiatives. The other expectation would be raising capital for investments through asset monetization,” Majumdar adds.

The agency said there is a need to keep the overall Consumer Price Index (CPI) inflation within the range of the RBI’s target inflation rate for the remaining year and also called for a closer coordination between the government and the RBI on inflation control. 

“The government and the RBI need to make a coordinated effort to control inflation. The RBI has already tightened the monetary policy but will have to calibrate policy rate rises to check inflation without impeding growth. In addition, the government will have to adjust trade duties such that its own revenues are not affected much,” the pre-budget expectation note on economy pointed out.

“We expect the GDP to maintain a reasonable growth momentum, unlike what we expected at the beginning of the year. Considering global economic uncertainties and a possible slowdown, we remain cautiously optimistic about growth that may range between 6.5 and 7.1 percent during FY2022–23 and 5.5–6.1 percent the following year. Economic activity will likely pick up early next year, contingent on the pace of global economic revival and the improving domestic economic fundamentals,” Deloitte said.