Tax savings will boost household spending on consumption, leading to a 15 basis points (bps) boost to the growth. The capital expenditure plan, along with the fiscal consolidation road map, can raise the growth rate of the economy by 10 bps, the bulletin said.
The union budget will expand the productive capacity of the economy by the thrust on capital expenditure, new technologies and by seizing the demographic dividend.
The fiscal deficit estimate is set at 5.9 per cent of the GDP for FY24, with a target of reaching 4.5 per cent by FY26. The government also increased the exempted tax slab to ₹7 lakh for the new regime and also reduced personal tax incidence on higher income citizens. The tax changes proposed in the budget will put at least ₹35,000 crore in the hands of households.
The digital initiatives could lead to improvement in productivity in the long run that can raise potential growth by 10 bps per year. The green growth investment proposals are expected to add 100 bps of potential output by 2030.
The fiscal consolidation will likely accelerate, aided by increase in potential growth.
“India will decouple from macroeconomic projections of current vintage and also from the rest of the world. In our view, the instrument of decoupling will be the Union Budget, by raising India’s growth prospects over the period 2023-27 and raising India’s potential growth,” RBI said in the bulletin.
ALCHEMPro News Desk (DS)
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