The Union Budget’s measures, if executed, could leverage potential growth from 6 per cent estimated by the IMF in 2022-24 to 6.8 per cent, stated the ‘State of the Economy’ report published by the Reserve Bank of India (RBI).
The report authored by RBI deputy governor Michael Patra and other staff at the central bank, further postulated that Budget budget would enable FY24 growth of 7 per cent. It provided the math behind its forecast.
According to the report, tax cuts alone will add 15 basis points (100bps = 1 percentage point) to India’s real GDP growth in 2023-24.Furthermore, these cuts would provide an additional Rs 35,000 crore to households, increasing consumption.
Also, the allocation of Rs 85,000 crore outlined under four schemes could crowd in private investment worth Rs 1.7 lakh crore, enhancing the total green investment (capex announced in the Budget) to Rs 2.6 lakh crore along with an increase in GDP of Rs 3.3 lakh crore, or around 100 bps, of potential output up to 2030.
The demographic dividend can be utilised by skilling youth and teachers through physical and digital libraries to advance potential GDP growth by 5-15bps a year, the report said.
Fiscal consolidation and debt reduction can reduce inflation in the medium term, ushering in a stable macroeconomic environment and a virtuous economic cycle, according to the RBI.