The benchmark Sensex at the Bombay Stock Exchange was up 850 points or 1.5 per cent and trading at 58,870 ahead of the budget presentation by Finance Minister Nirmala Sitharaman.
While the markets were up in line with the Asian markets, they also drew comfort from the fact that the Economic Survey showed that the government has enough fiscal space to push growth in the economy.
Over the last couple of years the growth in the economy has been pushed back by the pandemic. However, a promise of capex growth and investment in the economy this year could push growth and employment in the economy, which it is in need of.
Experts say if the government can present a budget proposal that can push growth in the economy, it would lift the broader economy and also the markets going forward.
The Economic Survey 2021-22 has projected a modest 8-8.5 per cent growth rate for the next financial year, 2022-23. This is significantly lower than the 9.2 per cent expansion projected by the NSO in its first advance estimates for 2021-22. It is also lower than the 9 per cent growth estimate by the IMF in its World Economic Outlook for the current year and the next.
Behind the conservative estimate for the next year are not just the many risks — global inflation to shortage of inputs — posed by Covid-19 that the Survey points to, but also its assessment that the economic slowdown induced by the pandemic is not merely a demand problem.
But first, why is the Survey’s 8-8.5 per cent growth estimate for the next financial year seen as modest? Last year, the Economic Survey (for 2020-21) had projected real GDP to grow 11 per cent in 2021-22, following estimates of a 6.6 per cent contraction in 2020-21. As things have turned out, the economy is estimated to grow only 9.2 per cent, as per the latest NSO estimate. Plus, the tapering off of the base effect also plays a part in the projections for next fiscal being more conservative.