Need for additional flexibilities in budget plans to meet fiscal target: Govt

As per a Reuters report, the government said, effective management of the exogenous shocks and global uncertainties requires additional flexibilities in terms of expenditure management and fiscal consolidation. The statement was released as a part of the government’s Fiscal Responsibility and Budget Management Act presented to the parliament.

The statement comes when the Centre explained the reason for not being able to give its rationale for deviating from the fiscal deficit glide path in parliament during the pandemic.

According to the Centre, three continuous COVID-19 waves coupled with the ongoing Russia-Ukraine war and global economic uncertainties have impacted almost all macroeconomic indicators.

Thereby, the Centre believes that economic projections amid global turbulence are likely to result in the risk of a considerable gap between projected numbers and final prints.

This statement of the government comes over a month ahead of Finance Minister Nirmala Sitharaman’s Union Budget 2023-24 which will be presented on February 1, 2023.

Notably, in 2020-21, the fiscal deficit scaled up to a record 9.3% from the previous year’s 4.6% due to the Coronavirus pandemic.

Meanwhile, between April to September 2022, India’s fiscal deficit widened to touch ₹6.20 lakh crore — accounting for 37.3% of annual estimates. Notably, the fiscal deficit widened from 35% witnessed in the same period a year ago.

In the Budget 2022-23 announcement, Sitharaman stated that the fiscal deficit in 2022-23 is estimated at 6.4% of GDP which is consistent with the broad path of fiscal consolidation announced last year to reach a fiscal deficit level below 4.5% by 2025-26. In value terms, the fiscal deficit is estimated at ₹16,61,196 crore by 2022-23 end.

Furthermore, the government ensured that they remain committed to strong macroeconomic fundamentals and financial stability. It highlighted that the Indian economy has performed better than other major economies.

Earlier this month, World Bank’s India Development Update revealed that India is on track to meet its fiscal deficit target of 6.4% of the GDP for the current fiscal year on the back of strong growth in revenue collections. It added that the country’s high nominal GDP growth in the first quarter supported strong growth in revenue collection especially due to GST, despite tax cuts on fuel.