The budget for next fiscal offers a new spreadsheet for growth, assuming the pandemic is on its last legs in India.

Reading these numbers against the prepandemic trend can tell us what to look for in the tricky triangulation of growth, inflation and yields ahead.

Essentially, the budget replaces fiscal consolidation as a priority with expansion, well into the medium term. The fiscal glide path itself has become footloose – with fiscal deficit at 9.5% for fiscal 2021, 6.8% targeted in the next and 4.5%, by fiscal 2026.

Why the deficit surge

One obvious reason is, in a pandemic year, expenditure couldn’t be held back too long and has caught up with trend. But revenue has not. This divergence is expected to hold for the next fiscal too.

The other is more ‘reformist.’ The budget reduces dependence on extra-budgetary resources (bonds fully serviced by the government, NSSF loans, among others) and rather spend from the budget, ushering in greater transparency.