This will lead to weaker exports for some more time. India’s CAD rose to 9 years’ high of 4.4% of GDP in the quarter ending September 2022 from 2.2 % in the preceding quarter
Whole Time Director & Head – Institutional Business, Arihant Capital
Gandhi, a Chartered Accountant and a Cost & Management Accountant, has a rich experience of over 30 years in the capital markets. Her pulse on the market trends, in-depth study of companies and the economy and broad sense of the industry have been a huge contributing factor to the growth of many institutional clients. Gandhi believes in keeping ethics as the core of investing. Over the years, she has driven the institutional business to garner a client base of over 90 institutions.
Considering the current economic situation in India, the three prime objectives of the government in the 2023 Budget would be to control Current Account Deficit (CAD), spur domestic growth & create a proper ecosystem for the development of Green Hydrogen.
Globally higher inflation, tightening monetary policy, and lingering effects of a pandemic have created a gloomy global outlook. Many developed nations are expected to enter the recessionary phase, including India’s exporting destinations such as the US & the EU.
This will lead to weaker exports for some more time. India’s CAD rose to 9 years’ high of 4.4% of GDP in the quarter ending September 2022 from 2.2 % in the preceding quarter.
Therefore, the prime focus of the Budget would be to curb imports and boost domestic manufacturing. There is a possibility of a customs duty increase on many high-end electronic items, jewellery & many more items.
Drive Domestic Growth:
India’s central bank went for aggressive rate hikes amid surging inflation levels. Since May 2022, the repo rate has been hiked by 225 basis points by the Reserve Bank of India (RBI).
The current policy rate stands at 6.25%, which is higher than the pre-pandemic period. Amid such rising interest rates, the government needs to focus on the growth of the economy, & give various incentives to small & medium size businesses for employment generation as well as the growth of their businesses.
Though India had a bumper crop in 2022, due to the delayed monsoon, the sowing cost and other input costs had gone up along with labour costs. This left lower margins for Indian farmers. This being a bigger section in India, Govt is required to come with more sops & incentives to farmers so that they can also contribute to India’s consumption story.
Developing Eco system for Green Hydrogen:
Globally energy costs have gone up. The transition to a decarbonised economy presents an economic opportunity for renewal and growth. For this transition, India needs to focus not just on producing Green Hydrogen but on developing the technology otherwise the sector will become import dependent.
R&D in public institutions needs partners from the private sector. A roadmap towards this in the Budget will lead India to have a proper position in the energy space.
Last but not the least, the government will also focus on fiscal consolidation through fiscal discipline and ensure the limit of fiscal deficit will not exceed.
(The author is Whole Time Director and Head of Institutional Business at
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