NEW DELHI: While India’s real GDP growth is estimated to be 7.3% for FY24 -- much higher than most predictions-- the nominal GDP or the GDP at current prices (2023-24 prices) is expected to be only 8.9%, which is lower than the budgeted target of 10%.
This means that the size of the Indian GDP (in current prices) would likely be R297 lakh crore at the end of the current financial year instead of the budgeted estimate of R302 lakh crore. This could make it difficult for the government to meet its fiscal deficit target.
The government has budgeted for a fiscal deficit of R17.9 lakh crore in the current financial year. If the nominal GDP for FY24 is R 297 lakh crore instead of R302 lakh crore, the fiscal deficit could be 6% of the GDP instead of the targeted 5.9% in the current financial year.
The nominal GDP growth slowed down to 8.9% in FY24 from 16.1% in FY23, due to sharp slowdown in deflator growth (1.4% in FY24 vs 8.2% in FY23). The wholesale price index (WPI), which constitutes the majority of GDP deflator, was in the negative zone for most part of the current financial year. Analysts, however, believe that though a lower nominal GDP growth may make the 5.9% fiscal target steeper, the government would most likely achieve it.
Gaura Sen Gupta, economist at IDFC First Bank, feels that the Centre would meet the FY24 fiscal deficit target of 5.9%, even after incorporating slowdown in nominal GDP growth and disinvestment shortfall. DK Srivastava, chief policy advisor, EY India, also expects the Central government to meet its budgeted fiscal deficit target for FY24.
“The budgeted buoyancy of Centre’s gross tax revenues (GTR) was only 0.99 which would imply a tax revenue growth of 8.8%, well below the budgeted GTR growth of 10.4%,” he said.“However, based on Controller General of Accounts (CGA) data, we expect a higher than budgeted growth in Centre’s GTR due to a much higher direct tax buoyancy than was assumed in the Budget. We expect the GoI to meet its budgeted fiscal deficit target for FY24,” he added.