Wednesday 7 December 2022
- Advertisement -
EconomyGovernment could reduce expenditure first time in 3 years

Government could reduce expenditure first time in 3 years

A caveat: Reuters’ source-based stories have been repudiated by the union government quite a few times in the recent past, but these sources sound reliable

The Government of India may spend less than what it had budgeted for this fiscal for the first in three years, news agency Reuters quoted sources as saying. This comes amid a push to meet a fiscal deficit target of 6.4% of the gross domestic product (GDP).

Total expenditure for the 2022/23 fiscal year that started on 1 April could come in at Rs 700 billion to Rs 800 billion below the budgeted Rs 39.45 trillion, the sources said, requesting anonymity. A caveat: Reuters’ source-based stories have been repudiated by the union government quite a few times in the recent past. However, the reasoning of these sources sounds plausible.

Government sources explain why

The government, the agency says, is keen to rein in the fiscal deficit as it is well above the historical levels of between 4% and 5%, having shot up to a record of 9.3% during the first year of the Covid-19 pandemic in 2020/21.

Even though tax reductions on fuel, aimed at reducing the impact of soaring global energy prices, could reduce revenues by more than Rs 1 trillion, one of the sources said total revenues were still expected to increase by over Rs 1.5 trillion to Rs 2 trillion this year.

The increase in revenue would still not be enough to cover anticipated additional expenses with, for example, the government potentially having to provide additional food and fertiliser subsidies of 1.5 trillion to Rs 1.8 trillion, according to the sources.

In spite of such pressures, the government remains intent on achieving its deficit target, according to one of the sources. “The government is not going to budge from the fiscal deficit target,” one of the sources said, noting that an “expenditure rationalisation” would be required.

The sources did not say what sectors were likely to be affected by expenditure cuts as discussions over revised budget estimates were ongoing and a final call would be taken by the end of December.

Economists at brokerages such as Citi, Kotak and see a risk to the 6.4% deficit target.

Without any expenditure cuts, Kotak expects a fiscal deficit of 6.6%, while expects the government to overshoot the deficit target of Rs 16.61 trillion by Rs 1 trillion.

Based on a Reuters story

Click/tap on a tag for more on the subject

Related

Of late

More like this

[prisna-google-website-translator]