In last year’s Economic Survey, the government had expressed confidence that the Indian economy would witness a “V-shaped recovery”. This was after the country’s growth rate had plunged to unprecedented depths in the days that followed a nationwide coronavirus-induced lockdown.

A year, two more waves of the pandemic, and several more Covid-19 curbs later, the government has expressed hope in this year’s Economic Survey that the macro-level indicators of the economy are “well-placed to take on challenges”.

Notably, India’s GDP growth in real, or inflation-adjusted, terms for the pre-pandemic financial year of 2019-’20 was revised by the government to 3.7% from the earlier estimate of 4%. Experts told the Hindustan Times that the downward revision raises questions on the government’s claims about the economy regaining pre-pandemic levels.

It is under these circumstances that Finance Minister Nirmala Sitharaman will present the Union Budget for the fiscal year 2022-’23 at 11 am on Tuesday.

State of the economy

In the Economic Survey tabled in Parliament on Monday, the government projected India’s Gross Domestic Product for the next fiscal year of 2022-’23 at 8% to 8.5%. For this fiscal, the survey pegged the growth rate at 9.2%. This is in line with the first advance estimate released by the government’s National Statistical Office earlier in January.

The survey noted that the economic impact of the second wave of coronavirus – driven by the Delta variant – was “much smaller” than that seen during the nationwide lockdown in 2020.

To lend perspective, India’s economy had contracted by an unprecedented 23.9% in the April-June quarter of the financial year 2020-’21. The three-month period largely coincided with the strict lockdown measures imposed during the first phase of the pandemic.

A year later, in the April-June quarter of 2021-’22, the economy grew by 20.1%. This was despite the fact that the Delta variant had ravaged the country during this time.

A year-on-year graph of the two quarters would indeed be “V-shaped”, but the “recovery” bit never quite happened. While releasing the first-quarter growth numbers for 2021-’22, the government had itself noted that in some cases they were “unduly high due to the low base”.

Economic data like GDP growth rate are calculated on a year-on-year basis. So, a low growth rate in the previous year leads to a low base for the current year’s numbers.

In a tweet about this year’s Economic Survey, Principal Economic Adviser Sanjeev Sanyal noted that the economy had regained “pre-pandemic” levels.

However, while making a projection for the next financial year, he mentioned a number of riders. Two of them are the expectation that global oil prices would fall considerably, and that “no further debilitating pandemic-related economic disruption” would occur.

The fact that the pre-pandemic levels of the economy are resting upon variables like global oil prices and the whims of an ever-mutating virus says a lot.

How do Sitharaman’s books look?

After presenting last year’s Budget, the finance minister had said that the government had “spent, spent and spent”. She had cited this as the reason for the fiscal deficit for 2020-’21 hitting its highest-ever level of 9.2% of the GDP.

For this year, ratings agencies have predicted that the government will be able to meet its target of limiting the deficit between its income and spending to 6.6% of the GDP.

According to rating agency India Ratings, this could happen as a result of higher revenues through tax and non-tax collections. India is set to overshoot its tax revenue targets for the first time in four financial years, according to BloombergQuint.

The uptick in earnings from tax could offset the government’s deficit on the disinvestment front. In the previous Budget, Sitharaman had set a target to earn Rs 1.75 lakh crore from disinvestments.

Reports suggest that the government could fall Rs 45,000 crore-Rs 75,000 crore short of this target. Even this estimate takes into account the initial public offering of the Life Insurance Corporation that the government hopes to complete in the remaining two months of this financial year.

The disinvestment picture would have looked bleaker if not for the takeover of Air India by Tata Sons and approval of a strategic buyer of the Neelachal Ispat Nigam Limited.

In Tuesday’s Budget, the finance minister is expected to set a disinvestment target of Rs 1.75 lakh crore for the next financial year as well, according to the Financial Express. Sitharaman would hope that the privatisation deals come through this year as the Economic Survey promises to “ramp up capital spending” over the next fiscal too.

What might the finance minister announce?

The Economic Survey noted that India would need to spend $1.4 trillion (more than Rs 100 lakh crore) through to the financial year of 2024-’25 to be able to become the Narendra Modi-led government’s flagship target of becoming a $5 trillion economy.

The projection suggests that the government is going to shore up the Rs 111 lakh crore allocation during a five year period of 2020-’21 to 2024-’25 in the National Infrastructure Pipeline. Investing in infrastructure has benefits on the job front too, as it involves labour-intensive sectors like construction and transport.

The loss of livelihoods during the pandemic meant that the income of 84% Indian households fell in 2021, according to an Oxfam report released in January. More recently, the protests against alleged botch-up in the recruitment process for jobs in the Indian Railways showed the extent of India’s unemployment crisis.

The government is also said to have earmarked Rs 1.4 lakh crore in this year’s Budget as fertiliser subsidy, according to The Times of India. The move could well be aimed at wooing farmers in the poll-bound states of Uttar Pradesh and Punjab. Farmers from both the states were at the forefront of the protests against the three farm laws which the government was forced to withdraw months ahead of the elections.

The government could also further ramp up the allocation to the Mahatma Gandhi National Rural Employment Guarantee Scheme to provide employment in rural areas.

Spending in the health sector rose to 2.1% of the GDP in this fiscal from 1.8% a year ago, the Economic Survey said on Monday. As the pandemic remains a threat for the economy, the government could likely ramp up its spending on health schemes to fund programmes like the booster dose regimen.

Sitharaman is also expected to make an announcement about the proverbial “bad bank”, which was announced in the previous Budget and got clearance last week. A “bad bank” cleans up the balance sheets of banks in the country by transferring their bad loans to itself.

The government hopes that the mopping up of the non-performing assets of banks will nudge them towards fresh lending that could lend wheels to a pandemic-struck investment cycle. A cleaner balance sheet of the government-owned banks also allows the finance ministry to borrow from the market at cheaper interest rates.


With as many as five states set to go to polls within days of the Union Budget, Sitharaman might also have an eye on providing relief to the salaried class too. The crisis due to loss of livelihoods and income has exacerbated due to a rise in inflation which has sent retail prices soaring by 8% over the last two years.

The rise in prices of daily-use commodities like edible oil, gas cylinders and fuel have not just pushed up monthly expenses, but also made the middle-class cautious about discretionary spending like buying a new vehicle or house.

As much as Sitharaman would like to lower income tax rates to put money in the hands of the salaried people, it does not look like a likely prospect as buoyancy in tax revenues has been fuelling the government’s spending.

However, the government is likely to announce incentives for opting for the new tax regime that had been announced two years ago, but did not find too many takers, according to the Mint. Prospects of a change in salary structure for those working from home and a tax deduction option for Covid-related expenses have also been in the pink paper reports.

In a recent survey by the Fight Inequality Alliance, 80% of the respondents said that a “Covid surcharge” should be imposed on those earning more than Rs 2 crore per year.

In 2019, when the slowdown in economy had become evident even before the pandemic, Sitharaman had announced a relief for the large industrialists by slashing corporate tax. The government had then said that the move was aimed at providing cash on the supply side of the economy. With the pandemic damaging the purchasing power of the middle class, it needs to be seen if the finance minister would “tax the rich” to shore up the demand side of the economy.