India’s fiscal deficit may climb to 6% of the gross domestic product, breaching the 5.9% target, for the financial year 2023-’24, said rating agency India Ratings and Research on Tuesday, reported The Hindu.
The target may be breached because of the possibility of revenue spending exceeding the Budget estimate by about Rs 2 lakh crore, the agency said.
The projection contradicts the Centre’s assertion made earlier this month that it is likely to achieve its fiscal deficit target of 5.9% of the gross domestic product.
On December 19, Parliament had approved a net additional spending of Rs 58,378 crore for the current financial year, PTI reported. This had increased the government’s total spending commitment for 2023-’24 to Rs 45.6 lakh crore. This includes about Rs 35.6 lakh crore of revenue expenditure and Rs 10.1 lakh crore of capital expenditure.
On Tuesday, the India Ratings and Research, a unit of Fitch Ratings, said that it believes that the Centre will seek a second supplementary demand for grants similar to the last fiscal year, thereby increasing the revenue expenditure.
“Higher-than-budgeted revenue expenditure triggered through the first and likely second supplementary demand for grants in combination with lower-than-budgeted nominal GDP will push the fiscal deficit to 6% of GDP,” the agency said.
It said that the fiscal deficit may cross the target due to higher spending on employment guarantee schemes and subsidies, despite growth in tax collections, reported The Telegraph.
The agency said that a major reason for the increase in revenue expenditure would be higher spending by some ministries and the recouping of over Rs 28,000 crore to the Contingency Fund of India that 30 government departments have drawn from as advances.
While seeking the first supplementary demand for grants, the government had planned to spend more funds in areas like food, fertiliser and liquefied petroleum gas subsidies and the Mahatma Gandhi National Rural Employment Guarantee Scheme.
The Centre spent around Rs 80,000 crore on the rural employment scheme that had a Budget estimate of Rs 60,000 crore before December 19. Under the first supplementary demand for grants, the government sought Rs 14,524 crore for the scheme.
Last week, the International Monetary Fund had warned India that its government debt may exceed 100% of its gross domestic product in the medium term. The United Nations’ financial agency had also said that long-term debt sustainability risks are high in India as a significant investment is needed to meet the country’s target of mitigating climate change.
The Centre has refuted the assertion by the International Monetary Fund.
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