Balancing Act to Sustain India's Growth

The government’s calibrated fiscal policy has given outsized returns for the Indian economy amidst a bleak global outlook. There’s promise that this will continue

- SAUGATA BHATTACHARYA

THE UPCOMING FY24 Budget is an opportunity to further strengthen India's macroeconomic fundamentals. Even as the developed world's economies slow down in 2023, India is expected to remain a bright spot with falling inflation and robust growth despite an expected moderation from the 2022 levels. The government's balanced fiscal policy over the past few years-in conjunction with a finely tuned monetary policy response-has helped India's economy remain resilient despite a series of public health and economic shocks, deep uncertainty and volatility in the financial markets.

As part of the broader fiscal blueprint, the Budget covers centrestate relations, fiscal efficiency, and tax and expenditure incentives for behavioural and strategic changes, among other things. Central to this design for FY24 and beyond will be the ability to balance multiple objectives, of which, the two most important ones are sustaining growth and advancing fiscal consolidation.

Both these aims are crucial in a year when the external economic environment will present challenges and opportunities alike. The IMF's prognosis is that a third of the global economy is likely to be in recession in 2023, and that will result in a sharp decline in global trade. There are also preliminary signs visible of the higher-risk corporate bond markets getting distressed. Hence, one particular priority will be to build up fiscal buffers to deal with the unexpected adverse shocks that may arise. But, there will be many opportunities as well, particularly in the global supply chains that are getting reconfigured.

To take advantage of these, India's competitiveness needs to be enhanced by leveraging the export markets that are likely to open up with the expanding set of trade and investment deals. The following will be some of the main economic choices for the Budget.