With prices spiking, the government will bear the burden to cushion the impact on consumers, resulting in a higher subsidy bill. Similarly, the extension of the free foodgrains scheme for the poor by another six months will cost the exchequer Rs 80,000 crore. The higher than budgeted spending has already driven the government to aggressively enhance receipts, both revenue as well as disinvestment, during the course of the current financial year as officials indicated that the Centre is keen to ensure that there are no fiscal slippages.
The increase in prices in general is expected to help the Centre and states garner higher GST and customs du- ty. But there are fears of consumption getting impacted due to the price surge, especially due to the Ukraine war. At the same time, the assessment is that a clearer picture on the direct taxes front will emerge in June when the first instalment of advance tax is due to be deposited. Government officials are, however, hopeful of improving upon the record direct collections from last year.
Against revised estimates of Rs 12. 5 lakh crore during 2021-22, the government ended the year with a direct tax kitty of Rs 14. 1 lakh crore, which was just Rs 10,000 crore short of the current year’s target. Several companies in sectors such as steel benefited from the massive gain in global prices, a trend that is expected to continue this year as well.
Some of the impact of the belt-tightening undertaken during the pandemic will, however, wear off this year, especially during the second half. While some of the spending that is budgeted for every year ends up as saving, there are additional expenses that come in during the year. The finance ministry brass is, however, focused on keeping the fiscal deficit within the 6. 4% target, with “conservative” revenue estimates expected to aid its efforts.
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