The Centre will rein in the fiscal deficit at the targeted 6.4% of the gross domestic product in the current financial year despite some likely variations in revenues and expenditures from the respective revised estimates, economic affairs secretary Ajay Seth told FE.
Seth said a 6.5% economic growth next year appears to be likely and ‘reasonable’ and any adverse impact of the banking crisis in the advanced economies on India by way of capital outflows would be manageable, thanks to strong forex reserves.
On the apprehension of a modest slippage from the fiscal deficit target for the current year due to a likely shortfall in tax revenues, the official said given the large Budget with several spending and revenue collection heads, there will always be some variations under some heads.
The revised capex target of Rs 7.3 trillion would, however, be met in FY23, he said.
“Given the pluses and minuses, we are fairly confident that the 6.4% fiscal deficit target will be met,” Seth said, adding that there’s absolutely no restriction on any ministry when it comes to spending up to the revised estimate (RE) level. “Thereafter, it is up to the spending capacities of each ministry as to how much they are actually able to spend. We do see that more or less ministries will reach the RE levels.”
The Centre’s expenditure was increased by Rs 2.42 trillion or 6.14% to Rs 41.87 trillion in the RE from the budget estimate (BE) of Rs 39.44 trillion, to cater to higher revenue expenditure on subsidies, including that on food and fertilisers. In FY23RE, the net tax revenue target was raised by 8% to Rs 20.87 trillion, 81% of which was achieved till January.
With the Second Supplementary Demands for Grants for FY23 placed before Parliament on March 13, seeking nod to spend an additional Rs 1.48 trillion on a net basis, analysts suggested a modest deviation may be there in fiscal deficit from the RE level of Rs 17.55 trillion. While most of the supplementary spending was captured in the FY23RE, an extra Rs 29,656 crore on fertiliser subsidy was provided over and above the RE.
FE had reported that till March 5, the Centre had released Rs 3.1 trillion to states, or about 70% of the centrally sponsored schemes (CSS) outlay for FY23. Of the Rs 3.1 trillion released, Rs 1.75 trillion or more than 56% was still lying with the Single Nodal Agencies (SNAs) of states. Additionally, about Rs 40,000 crore is lying idle with the state treasuries from previous year releases of the Centre for such schemes (pre-FY23 releases). The Centre will unlikely release more CSS funds to states in March unless they spend the balance lying with SNAs or their treasuries. Savings on CSS could offset any revenue shortfall in FY23.
On economic growth, Seth said this year it is expected to be close to 7%. “Next year, it is likely to moderate to some extent. The Economic Survey provides for a range of 6-6.8%, but next year around 6.5% appears to be reasonable,” he said.
Few favourable things are happening, for example, crude oil prices are coming down and that is good for the economy, he added.
The Brent crude fell 2.1% to $73.11 a barrel on Friday, down over 11% in a week amid concerns that the ongoing banking crisis in US and Europe may impact the wider economy.
Being a major importer of crude, natural gas and fertiliser, India could benefit from lower global commodity prices on multiple fronts such as in inflation management, lower subsidy bills and reduced cost for industry. However, a further global slowdown could hit India’s exports and economic growth as well, analysts reckon.