The Modi government has clearly indicated that it has no plans to adhere to fiscal consolidation targets till the crisis resulting from the pandemic blows over.

In its medium-term fiscal policy-cum- fiscal policy strategy statement, the Centre said: “It is vital for the government to retain requisite fiscal flexibility to effectively respond to emerging contingencies till the pandemic-induced uncertainties ease. Hence, amendment to FRBM law is not being proposed and fiscal projections for the year FY 2023- 24 and FY 2024-25 are not being placed alongside this Statement.”

Former RBI governor C. Rangarajan has said that “fiscal deficit of 2021-22 at 6.9 percent of GDP is a shade higher than the budgeted estimates. For 2022-23, the budget estimate is 6.4 percent of GDP. One understands the compulsion in a difficult situation like the present one. But fiscal prudence has its own advantages. The medium term goal should not be forgotten. Interest payments are estimated at 42.7 per cent of the revenue receipts of the Centre in 2022-23. This is a big pre-emption.”

He said the debt-GDP ratio in the coming year will touch 60.2 per cent, a far cry from the desired level of 40 per cent. “Policy makers need to revisit the programme of fiscal consolidation. Thus the strong point of the Budget is the stress on capital expenditures. However, a bigger push towards fiscal consolidation is needed,” he said.

Sonal Varma of Nomura said “directionally, the government has indicated its commitment to fiscal consolidation, but looking at the details the government has not taken any hard decisions to withdraw the revenue expenses announced in FY22”.

It has also announced an ambitious growth forecast for capex, which chimes with its existing focus on crowding in private capex. Hence, as we had expected, the budget provides fiscal consolidation ‘in spirit’, but focuses on growth ‘in intent’.”

“The 2022-23 Budget has somewhat successfully managed to balance fiscal retreat and support for economic recovery. It has a game plan premised on credible numbers. The fiscal deficit target of 6.4 per cent, prima facie, suggests that the FM has grabbed some much-needed fiscal space to nurture the nascent recovery and not be tempted to over-consolidate,” Abheek Barua, Chief Economist, HDFC Bank, said in a research note.