Budget May Target 11-12% Expansion In Nominal GDP

Gross tax mop-up may rise by 14-16%

According to initial projections being discussed by the finance ministry, the Centre could target a nominal GDP growth of about 11-12% in FY24 and expect gross tax collections to rise by 14-16% over FY23 Budget estimates. The projections, once finalised, will be part of the FY24 Budget.

"The estimates are still under discussion but the thought process is that the economy will do better than the current fiscal as inflationary pressures are likely to ease with softening in global commodity prices as well as a more sustained recovery in economic activities," said a source familiar with the development.

The Budget had projected nominal GDP growth in FY23 at 11.1%, but given the elevated inflation, it is expected to be significantly higher at around 16-17%.

RUN-UP TO THE BUDGET

The Reserve Bank of India (RBI) has forecast retail inflation at 5.2% in FY24, down from the 6.7% predicted for the current fiscal.

Budget may target 11-12% expansion in nominal GDP

Most agencies expect the country's real GDP growth to fall in FY24 from the FY23 level (IMF from 6.8% to 6.1%, S&P from 7% to 6%, Moody's from 7% to 4.8% and Nomura from 7% to 5.2%).

However, the finance ministry is also upbeat about the economy and tax collections in the next fiscal."Even with the lower inflation, it is felt that tax collections will register improved growth as economic activities normalise further post pandemic. Both direct as well as indirect tax mop-up are expected to register a robust growth in 2023-24," said the source.