Main points made:
1. Important to predict what is likely to happen rather than what should happen
2. More than in normal years, significant uncertainty in nominal GDP growth assumption for FY22. The right measure would be to compare FY22 real growth over FY20 – current consensus assumptions are too low. If one takes +5%, FY22 over FY21 could be +13% real, and +17% nominal. But the government is unlikely to take such numbers. May choose to go with a more conservative +13% nominal growth.
3. Consensus deficit forecast for FY22 is 5.6%. That too appears a bit high – if tax growth is 17% and deficit is 5.6%, the implied expenditure growth would be too high to execute. This implies that the government would take a more conservative tax growth number and a lower deficit.