Budget measures to help economy grow 7%: Finance Ministry

“For the full year, growth of global trade fell in 2022 and is expected to be still lower in 2023 with a further decline in volume and value of trade on the back of slowing global output. There is a likelihood of India’s exports showing tepid growth as the major export markets of India are forecast to decline sharply in 2023,” it said.

Monetary tightening appeared to have started weakening global demand during the December 2022 quarter, with various high frequency indicators pointing towards a slowdown in general, it said. “This may continue in 2023 as various agencies have forecasted a decline in global growth. Apart from the lagged impact of monetary tightening, the uncertainties emanating from the lingering pandemic and relentless conflict in Europe may further dampen global growth,” it said.

The Economic Survey 2022-23 had estimated a growth rate of 6.5 per cent for FY24 but with more downside than upside risks. “Inflation risks are likely to be lower for India in FY24. Still, they will not have vanished as global conditions, such as geopolitical conflicts and consequent supply disruptions that contributed to higher inflation in 2022 are still present,” it said.

Predictions of a return of El Nino conditions in the Pacific could presage a weaker monsoon in India, resulting in lower output and higher prices. Similarly, as with prices, external deficits may be a lesser challenge in FY24 than in FY23, but close attention to trends in international trade and capital flows will be warranted.

On the higher capex allocation in Budget 2023-24, it said the government is continuing its push towards investment-driven growth amid global headwinds. “The measures announced in the Union Budget FY24, such as a rise in capital expenditure, increased focus on infrastructure development, boost to the green economy, and initiatives for strengthening financial markets etc., are expected to promote job creation and spur economic growth,” it said.

The Budget has also announced measures to increase spending and consumer demand such as rationalisation of tax slabs and an increase in the basic exemption limit from Rs 2.5 lakh to Rs 3 lakh under the new personal income tax regime. “The Union Budget has further introduced important process measures, such as the setting up of the National Financial Information Registry, the implementation of a single window system, and reforms in property-tax governance, among others. These will improve processes in the financial market and, in turn, enable regulators to create a more effective feedback mechanism to review regulations,” it said.

Measures announced for the MSME sector will likely reduce the cost of funds and aid small enterprises. Revision in tax slabs under the New Personal Income Tax Regime is expected to boost consumption, thus providing more impetus to economic growth, the report said.