Bhubaneswar: The annual budget size of the State is estimated to reach around Rs 2.65 lakh crore in the financial year 2025-26, as per a medium-term fiscal framework (MTFF) developed by the Department of Finance.
The Department of Finance(DoF), in consultation with the IMF’s South Asia Regional Training and Technical Assistance Center, has developed the MTFF to support annual budget formulation and medium-term fiscal planning to strengthen Odisha’s public finances and the credibility of the budget process.
MTFF is a set of forecasting and analytical processes that enable the State to prepare macroeconomic and fiscal projections for a three-year period. These projections are based on assumptions concerning global, national and local conditions, said a senior official of the State Government.
The Fiscal Strategy Paper submitted to the Odisha Legislative Assembly recently points out that the framework takes into account variables such as global economic growth, inflation, volatility in the mining industry and specific fiscal risks, he said.
The objective of developing the MTFF is to use it as a reference for the preparation of the annual budget and fiscal planning over the subsequent two years. It gives a clear and comprehensive sense of the fiscal strategy within the broad objectives of the FRBM Act, said the official.
The annual budget for the financial year 2022-23 is Rs. 2 lakh crore which is 17.6 percent more than the previous year budget estimate.
As per the MTFF, the budget size is projected to reach Rs. 2.25 lakh crore, Rs. 2.45 lakh crore and Rs. 2.65 lakh crore in FY 2023-24, FY 2024-25 and FY 2025- 26, respectively.
It is estimated that the Programme Expenditure is set to increase from the budget estimate of Rs. 1 lakh crore in FY 2022-23 to Rs 1.45 lakh crore in FY 2025-26.
The Government has estimated that all the fiscal parameters of the State Government will remain within the limits set by the FRBM Act.
Over the past eight years, Odisha’s economy has grown at an average rate of 8.1 per cent. This has been faster than national GDP growth, and among the fastest-growing State economies in India. As a result, the State’s share of the national economy has grown to 2.5 per cent of GDP.
For the period FY 2022-23 to 2024-25, the upward (best-case) scenario growth in GSDP is projected at 11, 9 and 9 per cent respectively. The most likely scenario is projected at 8 per cent each year, as per the Fiscal Strategy Paper.
In the downward (worst-case) scenario, Odisha’s economy will grow at 7 per cent in the medium-term during the period from FY 2022-23 to 2024-25. Inflation (and growth in GSDP deflator) is projected at around 5 per cent during FY 2022-23 to 2024-25.
Although Odisha has registered impressive growth in recent years, the economy is vulnerable to natural calamities owing to its geographical location, dependence on natural resources and the external environment.
Downside risks to the growth projections stem from uncertainty in the global and national economic outlook. Slower growth in India’s economy would reduce GSDP growth in Odisha due to weaker demand for Odisha’s mining output and goods and services. Higher energy costs may have a cascading effect on supply chains and hence consumption, amid economic recovery, it said.
As per the report, the mining sector accounts for 13 per cent of GSDP. Historically, this sector has driven the economic growth of the State. Its performance is heavily dependent on global metal prices and demand. It is also expected that the recovery “remains uneven across sectors”.
High Inflation mostly due to higher energy prices and food articles will impact the private capital formation. If the trend continues, it will affect the GSDP in the medium term.