Spending by the Indian government this fiscal could be below budget for the first time in three years, two sources with direct knowledge of the matter told Reuters in a push to meet the fiscal deficit target of 6.4% of GDP. Told in the middle
Sources, requesting anonymity, said the total expenditure for the FY23 financial year beginning April 1 could be below the budgeted ₹700 billion to ₹800 billion ($8.59 billion to $9.82 billion).
The government is keen to rein in the fiscal deficit as it is well above the historical levels of 4% to 5%, which reached a record 9.3% in 2020-21 during the first year of the COVID-19 pandemic.
Although tax cuts on fuel, aimed at mitigating the impact of rising global energy prices, could cut revenues by more than ₹1 trillion, one of the sources said, adding that total revenue is still between ₹1.5 trillion to ₹2. trillion is expected to increase. year.
The increase in revenue will still not be enough to cover the anticipated additional expenses, for example, with the government potentially providing additional food and fertilizer subsidies of ₹1.5 trillion to ₹1.8 trillion, according to sources.
According to a source, despite those pressures, the government is intent on achieving its deficit target.
“The government is not going to deviate from the fiscal deficit target,” the source said. Given that “expenditure rationalization” would be needed.
The sources did not say which sectors are likely to be affected by the expenditure cut as the revised budget estimates were under discussion and a final decision would be taken by the end of December.
The finance ministry declined to comment.
Economists at brokerage firms such as Citi, Kotak and Icra see a risk to the loss target of 6.4 per cent.
Without any spending cuts, Kotak expects a fiscal deficit of 6.6%, while ICRA expects the government to exceed the deficit target of ₹16.61 trillion by ₹1 trillion.