Mumbai: The house economist at the country of the country’s largest lender (SBI) has urged the government to treat the economy of the pandemic and not too focused on fiscal consolidation because there is a need for more stabilization steps to maintain back recovery.
And one of the best ways to start a new fiscal is to complete the sale of this fiscal lic stock.
It can be far in repairing the excessive balance sheet which in turn will reduce the fiscal deficit to 6.3 percent in FY23 which is much lower because public cash will be left with a cash surplus at least Rs 3 Lakh Crore to start a new fiscal, head of SBI Soumya economist kanti ghosh said in pre-budget records on Wednesday.
He said the budget should not improve a fiscal deficit by more than 30-40 bps because most of the economic sectors still need support.
The railroad in a 6-6.5 percent fiscal deficit for FY23, down from 6.8-7.1 percent of FY22, he said the budget also allowed for fiscal consolidation that was very gradual.
For FY23, fiscal consolidation must remain limited to 30-40 bps from current fiscal.
He also warned of new taxes such as wealth tax or other people at this point because it could do more damage than benefits.
Assuming the government maintains a growth of expenditure at 8 percent over the estimated FY22 at RS 38 Lakh Crore on TA23 and receipt (minus loans and other liabilities) will grow by 10.8 percent, it will cause a fiscal deficit around RS 16.5 lakh crore or 6.3 percent of GDP at FY23.
If the sale of LIC shares passed in FY22, the government might end fiscal with a large cash balance of RS 3 Lakh Crore.
This can be useful in supporting most government fiscal deficits without receiving loan market assistance, according to records.
Against this background, the net market loan from the center tends to be around RS 8.2 lakh crore and with a payment of Rs 3.8 lakh Crore, a gross loan is expected at Rs 12 Lakh Crore (73 percent of the fiscal deficit and equal to FY22 and FY21), Ghosh said.
Overall dirty loans by the central and state tend to be around RS 21 lakh crore (Rs 19.7 lakh crore at FY22) and a net loan around Rs 14.8 lakh Crore (RS 15 Lakh Crore at FY22).
Ghosh also showed that it was not like in FY22, when RBI had done Omos around Rs 2.6 lakh crore, helping government loan programs without interruption, in FY23, the support was not possible.
He specifically called for sustainable support to MSMEs saying 6.33 Crore these units contributed 29 percent of GDP, employing more than 11 crores.
And one way to help them is to let the bank lend them more by verifying their cash flow smoothly through GST 4 / ITR in real-time.
Other steps can extend the Emergency Credit Line Guarantee Scheme (ECLGS) to the end of FY23 to allow the completion of the entire RS 4.5 lakh crore target from the credit flow below.