The Centre’s expenditure may exceed the budget estimate (BE) by about Rs 2 trillion in the current fiscal year, which will be funded through additional tax revenue receipts, while keeping the fiscal deficit within the targeted level of 6.4% of the Gross Domestic Product (GDP).
Currently, the finance ministry is in the last leg of the exercise of finalising the revised estimate of budget expenditure for FY23, against the BE of Rs 39.5 trillion and determining the budget size for FY24. Although a final call on FY24 budget size is yet to taken, sources indicated that the Centre would continue on the fiscal consolidation path announced last year as per which the fiscal deficit will be brought down to below 4.5% by FY26, with a fairly steady decline over the period.
So far, the Centre has announced additional expenditures to the tune of Rs 2.6 trillion on food, fertilisers and fuel subsidies to insulate people from elevated global commodity prices. This may increase further to Rs 2.8 trillion or thereabouts after factoring in likely additional requirement for the fertiliser subsidy.
The free ration scheme will cost Rs 1.24 trillion in April-December of FY23 and the fertiliser subsidy bill is seen to be Rs 1.15-1.3 trillion more than the BE of Rs 1.05 trillion. Besides, a “one-time grant” of Rs 22,000 crore was allocated to state-run oil marketing companies to cover their under-recoveries on the sales of domestic LPG.
“However, most other ministries will likely see some reduction from their budget estimate (BE) level in the revised estimate (RE) for the year due to the slow pace of expenditure so far. The aggregate such reduction may be around Rs 70,000-80,000 crore,” a senior government official told FE.
According to officials, the savings are mostly under centrally sponsored schemes and central sector schemes as the government has tightened the rules for the release of funds and linked them to either utilisation or return of the unspent funds released on or before March 2022.
The Centre has recently retrieved about Rs 40,000 crore lying with state treasuries for the last 2-3 years and these states were forced to release these funds to agencies implementing assorted centrally sponsored schemes. About Rs 20,000-30,000 crore pre-FY23 funds lying idle with various implementing agencies under central sector schemes were also channelised to the respective schemes. In effect, these are savings from the current financial year’s allocation for these schemes.
“Some savings are also expected from budgeted grants for urban local bodies as many have not undertaken the mandatory reforms for these grants. Savings are also likely from budgeted grants for the health sector as infrastructure creation is taking time,” another official said. The Centre has budgeted Rs 22,908 crore in grants for urban bodies in FY23 and Rs 13,192 crore for the health sector.
“Budget size will grow as extra tax revenues are expected even though non-tax revenues may see some shortfall,” the second official said.
The Centre may garner extra Rs 2.5 trillion in net tax revenues over the budget estimate (BE) of Rs 19.35 trillion, thanks to robust 25-30% on-year growth expected in direct taxes and goods and services taxes as against flattish growth factored in the BE for FY23.
However, non-tax revenues may see a shortfall of about Rs 50,000 crore in FY23 as the dividend receipts from the Reserve Bank of India may have been Rs 25,000-30,000 crore less than assumed in the Budget and some shortfall is seen in the disinvestment revenue receipts target of Rs 65,000 crore for the year.
Total expenditure contracted by 3% on year in August 2022 as revenue expenditure declined by 4% whereas capital expenditure displayed a marginal rise of 1% in the month, reflecting the tightening of spending under various schemes to avoid floating of funds with agencies.