Centre will ‘comfortably’ meet FY24 fiscal deficit aim even if there is unanticipated spending: Source

The finance ministry is currently conducting meetings with various ministries to take stock of expenditure patterns for the current fiscal year.

The Centre expects to “comfortably” meet the fiscal deficit target of 5.9 percent of the GDP for the current financial year, despite demands for more allocations for schemes such as the rural employment guarantee plan, a senior government official said.

While the Ministry of Rural Development has sought more funds for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), the finance ministry is yet to take a call on the request, the official added.

Since 95 percent of the Budget allocation for MGNREGS has already been utilised so far in the current fiscal year, the Centre will likely provide an additional Rs 30,000-40,000 crore for the flagship scheme soon, the Financial Express reported on October 16, citing sources. The Budget allocation for the rural job plan is Rs 60,000 crore in FY24.

Apart from potentially higher expenditure on account of the rural job plan, recent media reports suggested that the central government may extend its free foodgrain plan beyond December. It is also likely to increase instalments for its income assistance scheme for farmers as it looks to woo key voters ahead of general elections next year.

While the Centre is providing free foodgrains to all eligible households under the National Food Security Act, 2013 for a year from January 1, the PM-KISAN scheme, which came into effect on December 1, 2018, offers Rs 6,000 in three equal instalments to select farmers.

New Delhi has already taken a few populous steps in the last two months by reducing the cost of LPG (liquefied petroleum gas) cylinders. The latest move came on October 4, with the government approving a hike in the cooking gas subsidy under the Pradhan Mantri Ujjwala Yojana (PMUY).

The finance ministry is currently conducting meetings with various ministries to take stock of expenditure patterns for the current fiscal year. This will help the government review the actual spending undertaken by various departments as well as calculate any savings that can be used for potential policy calls.

Typically, there are concerns surrounding the government’s ability to stick to its budgeted fiscal deficit figure during an election year as it looks to meet demands for higher expenditure on account of popular schemes and more subsidies.

However, despite the slew of state polls next month as well as national elections between April and May 2024, economists have been of the view that fiscal concerns are limited since the government has enough buffers.

“A higher-than-budgeted dividend surplus transfer of Rs 87416 crore from the Reserve Bank of India (RBI) is likely to provide some cushion to meet any undershooting in other revenue streams, including disinvestment or potential overshooting in expenses, relative to respective budget estimates, such as MGNREGA,” ICRA’s chief economist Aditi Nayar had said on September 29.

A massive rise in direct tax collections will also significantly help the government meet its fiscal deficit aim for 2023-24. While corporate tax collections surged more than five times in August year-on-year, personal income tax collections more than quadrupled.

The government's fiscal deficit widened to Rs 6.43 lakh crore in the April-August period from Rs 6.06 lakh crore in the April-July period. At Rs 6.43 lakh crore, the fiscal deficit for the first five months of the current financial year accounts for 36 percent of the full-year target of Rs 17.87 lakh crore.