Upcoming elections, weak growth to create hurdles for India's fiscal consolidation next year

India's decision to go for fiscal consolidation while eyeing economic revival will create a challenging path for it in FY24. Upcoming elections and a slowdown in growth will pose major hurdles for India in the fiscal year that will start from from April 2023.

According to financial services firm Nomura, ambitious targets will be set ahead of the elections on the horizon in 2024, and this will increase pressure on the government's finances. The prediction by Nomura comes shortly after India's government placed growth as the top priority for its upcoming budget.

But before the turbulent year ahead, the government will achieve its fiscal deficit target for FY23, thanks to high tax collections. The decision to slash gross market borrowing by Rs 10,000 crore will also reduce pressure on the economy. Domestic stocks are also expected to gain more buyers in the last six months of the coming year, thanks to global headwinds giving way to a recovery.

But India's GDP growth will be affected during the first half of 2023, falling from 6.7 per cent to 4.5 per cent. The Rupee now above 81 against the dollar, can rise up to 78 by end of next year and to 76 in the year after that.