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Government: Budget 2022 Needs to Focus on Fiscal Consolidation

16 August 20223 mins read by Angel One
Government: Budget 2022 Needs to Focus on Fiscal Consolidation
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Back in 2014, when Finance Minister Arun Jaitley presented his Union Budget, he mentioned that Budget proposals were only a stepping stone towards the continued growth of 7-8% in the upcoming 3-4 years. Other factors would also contribute to macroeconomic stabilization, apart from the budget proposals. These secondary factors are:

  • Lower inflation levels
  • A manageable current deficit account
  • Lesser fiscal deficit

He aimed to lower this fiscal deficit. In fact, reducing this fiscal deficit as a percentage of the GDP was the goal of that NDA government. Moreover, Arun Jaitley blamed the UPA government for reducing expenditure rather than increasing revenues. In 2013-2014, the fiscal deficit was 4.5% of the GDP.

However, at that time, the UPA-led government had faced the financial crisis of 2008. This crisis widened the fiscal deficit from 2.5% to 6.2% to 6.6%. It led the then finance minister Pranab Mukherjee to announce a stimulus packet of 3% of the GDP.

NDA-Government Tackling Fiscal Deficit

When Jaitley took over, the fiscal deficit was at 4.5% in 2013-2014. In his budget speech, Arun Jaitley mentioned that his fiscal consolidation target involved a fiscal deficit of 3.6% for 2015-2016 and 3% for 2016-2017.

However, this government never achieved this promise. Covid-19 too played spoilsport in achieving this fiscal deposit target.

However, FM Nirmala Sitharaman said that fiscal consolidation was a part of her government’s budget strategy.

In the budget of 2022, they will attempt to reach a fiscal deficit of 4.5% of GDP. However, research teams have predicted that the fiscal deficit will stay at around 7%. The government hopes to achieve the fiscal deficit level by following these practices:

  • They will increase the tax revenue by improving compliance
  • Increased receipts from the monetization of assets which include land and public sector enterprises

Bottom Line

However, experts are of the opinion that a Rs. 2.25 lakh crores rise in revenues, a surplus cash position with the central bank, and unspent balances with the ministries will cushion this shortfall.

Under this climate, the budget of 2022 is greatly anticipated to provide some measure of relief to stimulate growth and foreign investment.


Frequently Asked Questions

  1. Who presented the union budget 2021?

Ans. Nirmala Sitharaman presented union budget 2021.

  1. What is the fiscal deficit of the State government?

Ans. The fiscal deficit is 3.3 to 3.2% of the GDP.

  1. What will be the expected gold price?

Ans. The expected gold price will be Rs. 4,400 – Rs. 4,900 in 2022.

Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.

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