Govt will meet fiscal deficit aim as no risk of subsidies slippage: Fin Min official

Finance Minister Nirmala Sitharaman, in her budget speech on February 1, lowered the fiscal deficit target to 5.9 percent of gross domestic product in this financial year from an estimated 6.4 percent last fiscal year.

The government is confident of meeting its fiscal deficit target this financial year despite any pre-election expenditure increases as food and fertiliser subsidies won’t exceed the budgeted amount and revenue targets are easily achievable, according to a senior finance ministry official.

“There may be some new things in an election year, some new things may come up,” the official, who did not want to be identified, told Moneycontrol. “Any additional expenditure may come this year, but we are fairly confident of sticking to our overall deficit numbers.”

Finance Minister Nirmala Sitharaman, in her budget speech on February 1, lowered the fiscal deficit target to 5.9 percent of gross domestic product in this financial year from an estimated 6.4 percent last fiscal year.

The budget has estimated gross tax revenues to rise by 10.5 percent to Rs 33.61 lakh crore this fiscal, while total expenditure is to rise 7.5 percent to Rs 45.03 lakh crore.

The fiscal deficit target is being lowered through a slashing of subsidies like food and fertilizer, which had ballooned in the pandemic years and due to Russia’s invasion of Ukraine.

The budget pegs fertiliser subsidy at Rs 1.75 lakh crore this fiscal, a fall of Rs 50,000 crore from the revised estimate for last year. Food subsidy is pegged at Rs 1.97 lakh crore, down Rs 90,000 crore from last year.

Last year, for almost six months, global crude oil and gas prices were at elevated levels, with oil prices hitting $120 per barrel. This fiscal, both oil and gas prices have come off drastically.

Realistic revenue

The government has not assumed any extraordinary rate of revenue growth this fiscal, the official said.

“If inflation is 5 percent and GDP growth is likely at 5.5 percent, nominal GDP growth of 10.5 percent is likely with a tax buoyancy of 1. The government is not optimistic but realistic,” the official added.

While many countries in the West face an impending recession, India continues to be the fastest-growing economy in the world.

Meanwhile, a resurgence in Covid cases also does not present a risk to the budget numbers as the infections are largely mild, the official said.

“Right now hospitalisation, intensive care cases, oxygen demand is very low,” the official added.

India recorded 7,533 new coronavirus cases, raising the tally to 4.49 crore as on April 28, while the active cases decreased to 53,852, according to the Union Health Ministry data.