India’s Union Budget 2021–2022: Focus on economic recovery and establishing fiscal credibility

  • India’s budget for the fiscal year 2022 is positive, as it aims to support economic recovery through higher government expenditure
  • The fiscal deficit is estimated at 6.8% of GDP in FY22 (vs 9.5% in FY21). The government intends to narrow this to below 4.5% of GDP by FY26
  • The revenue growth assumption remains prudent, as tax revenue is expected to grow broadly in line with nominal GDP growth (+14% y/y); however, divestment targets remain an overhang
  • Other important reforms include INR200bn (USD2.8bn) allocated towards recapitalisation of public-sector banks and setting up a development finance institution (DFI) with INR200bn (USD2.8bn) of initial capital
  • The establishment of an agency to purchase investment-grade (IG) corporate bonds is expected to boost confidence among investors and enhance liquidity in the secondary market, bolstering investment in the corporate bond market

Economic growth outweighs fiscal austerity

No bad news is good news

The fiscal math is more realistic



Deficit funding

Bond-market support



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Acuity Knowledge Partners

Acuity Knowledge Partners

We write about financial industry trends, the impact of regulatory changes and opinions on industry inflection points.