India should be able to meet fiscal deficit target for this FY; inflation is easing, FM Sitharaman says

Finance Minister NIrmala Sitharaman | Illustration: Moneycontrol

India should be able to meet its budgeted fiscal deficit target for the current financial year, Finance Minister Nirmala Sitharaman said on December 14.

“The current situation very clearly gives me that kind of a feeling that we will be able to comply with what we have said in the budget,” she said in Lok Sabha during her response to a discussion on supplementary demand for grants, which were passed after voting.

The government aims to lower fiscal deficit to 6.4 percent of gross domestic product this fiscal year, in line with its fiscal consolidation commitment, Sitharaman said.

Revenue buoyancy gives more space to the government, she added.

Citing the latest inflation prints for November, Sitharman said that retail inflation has come back within the Reserve Bank of India’s tolerance band while wholesale price inflation has eased to a 21-month low.

The finance minister is due to present the budget for 2023-2024 on February 1 amid expectations that the Centre may keep pressing hard on the capex pedal.

In its Budget for 2022-23, the Centre set itself a record capex target of Rs 7.5 lakh crore - up 35 percent from the budget estimate and 24 percent higher than the revised estimate for 2021-22 - which included Rs 1 lakh crore as a 50-year, interest-free loan to state government.

Nearly 55 percent of the capex has been achieved in the fiscal first half, the minister said on December 14.

India is slated to be the fastest growing G20 economy this year but could face headwinds from tight monetary conditions amid a slowing global economy.

The RBI is widely expected to end its rate hike cycle early next year after sharp rate hikes since early May to curb red-hot inflation.

The Indian government targets lowering the fiscal deficit to below 4.5 percent of GDP by 2025-26.