The government on Friday sought parliamentary clearance for an additional net expenditure of Rs 3.26 trillion, as it presented the first batch of supplementary demands for grants for the current fiscal. The extra gross spending for FY23 is pegged at Rs 4.36 trillion, about Rs 1.1 trillion of which will be met through savings or enhanced receipts of various ministries and departments.
The extra net spending is marginally higher than analyst expectations, but may not still result in any significant breach of the fiscal deficit target of 6.4% of the GDP for FY23.
The FY23 Budget calculations went haywire after the Ukraine war broke out unexpectedly, and spurt in commodity prices, especially of fertiliser — on top of the continuance of a free ration scheme – substantially inflated the government’s subsidy bill.
In fact, a substantial chunk of the proposed net cash outgo in the supplementary demands for FY23 involves additional fertiliser subsidy (Rs 1.09 trillion), food subsidy (Rs 80,348 crore) and grant to oil-marketing companies for under-recoveries on cooking gas and Ujjwala scheme, etc (Rs 24,944 crore).
Additionally, various proposals suggest capex has been augmented by around Rs 31,000 crore, according to ICRA chief economist Aditi Nayar.
The supplementary demands include a total of 75 grants and six appropriations. They were tabled in the Lok Sabha by minister of state for finance Pankaj Chaudhary.
Several analysts expect expenditure to exceed the budget estimate of Rs 39.45 trillion by Rs 2.2-2.7 trillion this fiscal, even after factoring in savings from several schemes and heads. However, given the surge in revenue mop-up, compression of certain revenue expenditure and the higher-than-expected expansion of the nominal gross domestic product (GDP), the government hopes to rein the FY23 fiscal deficit within the target of 6.4% of GDP.
The Centre’s net tax revenue is expected to exceed the FY23 Budget estimate of Rs 19.35 trillion by around Rs 2.5 trillion. This also means the government doesn’t need to raise its gross market borrowing in the second half of this fiscal from the proposed level of Rs 5.92 trillion.
A steep 176% increase in capital expenditure and a 44% rise in revenue expenditure in October widened the Centre’s fiscal deficit to 45.6% of the annual target until October this fiscal, compared with 36.3% of the respective target a year before.
The proposed extra spending also includes Rs 13,669 crore for meeting the requirements of the department of telecoms, Rs 12,000-crore capex for railways and Rs 10,000 crore for the transfer to GST compensation fund. Extra capex of Rs 19,198.73 crore has been proposed for the road transport ministry.
The finance ministry has also sought approval for an additional expenditure of Rs 46,000 crore for the rural development ministry; it includes `4,920 crore for the Mahatma Gandhi National Rural Employment Guarantee scheme.
“With savings likely under other heads, we do not see the supplementary demands resulting in a meaningful breach of the fiscal deficit target of 6.4% of GDP,” ICRA’s Nayar said.