Savings under many centrally sponsored schemes and central-sector schemes, coupled with buoyancy in revenue, will give enough firepower to the Centre to meet additional expenses in existing or new schemes, without breaching the fiscal deficit target for the current financial year, a senior official told FE.
Efficient cash management could enable savings of Rs 2-2.5 trillion from the budgeted expenditure for the current fiscal, making the sum available for extra allocation to some of the existing schemes like MGNREGS and new schemes that may be rolled out, he said.
Around Rs 2 trillion, which was unspent by a host of states and other implementing agencies at the end of FY23, was sought to be used before fresh releases were initiated from FY24 budget outlays. The just-in-time principle of cash management, which entails utilisation of at least 75% of the previous fund releases before fresh funds are provided, could save around Rs 2 trillion from the current financial year’s budget allocations in these schemes, the official said.
There could be also savings of around Rs 0.5 trillion from the Rs 10 trillion capex budget for FY24.
This means that unless oil prices spike to over $100/barrel for the remainder of H2, which could necessitate an excise duty cut that would impact excise revenues, the government’s fiscal deficit target faces absolutely no pressure, and it would be contained within the targeted 5.9% of GDP in FY24, the official said.
Even though the special capex loan disbursements to states in FY24 are being frontloaded, it could reach around Rs 1 trillion by the end of FY24 from about Rs 0.54 trillion H1. That could lead to savings of Rs 0.3 trillion from the budget outlay of Rs 1.3 trillion, largely due to the conditions that may not be fully met by some states.
Similarly, the Centre’s plan to go for a staggered capital infusion in the three state-run oil marketing companies (OMCs) would mean only a portion of Rs 30,000 crore earmarked for the purpose would be utilised in FY24 due to their better finances.
These savings will not necessarily bring down the overall spending from the budgeted Rs 45 trillion for FY24. These savings would be used for other priority areas identified by the government in an election year including additional allocation of around Rs 30,000-40,000 crore for the job guarantee programme (MGNREGS), around Rs 9,000 crore for subsidised gas cylinders to PM Ujjawala beneficiaries and Rs 5,000 crore in PM Vishwakarma Samman Yojana.
Some additional welfare measures are in the pipeline including a new Rs 60,000 crore housing interest subsidy scheme for the urban poor and middle class. Under the scheme, around Rs 10,000 crore expenditure could be incurred in FY24. Ahead of the general elections in April-May, the Centre is also likely to extend the free grains scheme by another six months till June next year, which will be around Rs 12,500 crore.
Among others, there is a possibility that the Centre may increase the income support to farmers under the PM-KISAN scheme by Rs 2,000-3,000 per farmer household from Rs 6,000 now, and besides stepping up procurement under the minimum support price (MSP) to ensure that rural income levels don’t fall in real terms. Such an increase in PM-KISAN could cost the exchequer Rs 20,000-30,000 crore in FY24.
A potentially higher nominal GDP growth and buoyant revenues could also help the government report a lower fiscal deficit number than 5.9% if everything else remains unchanged.
The government’s direct and indirect tax receipts as well as non-tax revenues are in aggregate on track so far and experts don’t see any threat to annual target achievement even though disinvestment receipts could fall short of the target by Rs 30,000 crore.
“We don’t think there is a material risk of the fiscal deficit target being breached in FY24,” ICRA chief economist Aditi Nayar said.
World Bank has estimated India’s nominal GDP growth at 11.5% for FY24 compared with the government’s 10.5% factored in the budget for the year.