Thread by @livemint

#MintPlainFacts | A week from now, FM Nirmala Sitharaman will present the 2nd consecutive Union Budget with an eye on free-flowing spending taps to prop up the fragile economy.

But imminent bond redemptions in the coming years present one big hurdle.

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Healthy tax collections, which are likely to continue into 2022-23, could provide some wiggle room to keep up the capital expenditure.

#MintPlainFacts: livemint.com/budget/expecta…

Loosening the fiscal deficit target to allow spending is no longer an option. Rather, Sitharaman will be expected to tighten it to rein in debt. More worryingly, a third of the additional spending is on account of subsidies.

#MintPlainFacts: livemint.com/budget/expecta…

The present economic scenario could allow the government to cut its fiscal deficit target to around 5.8-6.5% next year as against the budgeted 6.8% for this year. However, more than the fiscal deficit, all eyes will be on gross borrowings this time.

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Bond yields are already on the rise and the imminent monetary policy tightening by the RBI will only increase the government’s cost of borrowing. But this does not mean the Budget should cut down on the much-needed spending.

#MintPlainFacts: livemint.com/budget/expecta…

All said, the challenging backdrop against which the Budget will be presented should not keep the government from increasing capex markedly, economists said.

#MintPlainFacts: livemint.com/budget/expecta…