Higher tax revenues will enable the government to reduce the need for additional debt, although despite a financial expansion of about ট্র 2 trillion more than FY23 budget estimates, analysts say no significant further relief measures have been introduced.
FY23 saw a total additional expenditure of around Rs 2 trillion due to higher subsidies on fertilizers, free grain projects and LPG subsidy for the bright beneficiaries. The reduction in excise duty on auto fuel on Saturday will result in a revenue loss of about Rs 85,000-90,000 crore with more than 10 months left in the current financial year.
“We estimate that nominal GDP growth in FY23 could be 15% higher than the budget estimate of 11.1%. Tax surges could also be higher than the budget estimate of 0.9. With a surge of 1.2 per cent in gross tax revenue and a nominal 15% growth in nominal GDP, the Centre’s GTR growth could be around 18%, “said DK Srivastava, Chief Policy Adviser, YY India.
This could lead to an additional tax revenue of around Rs 2 trillion more than the budget estimate, Srivastava said.
Excess tax revenue can be used for additional relief in fertilizer subsidies. “The need for additional borrowing in FY23 depends on the choices the government makes as the fiscal year progresses. If global commodity prices fall slightly, the problem of ongoing inflation could be lessened. We expect a marginal slippage to the budgeted revenue deficit target of 6.4% of GDP, ”said Srivastava.
Unless there is another significant downturn in the economy for the rest of the year, additional revenue will be able to cut excise and absorb subsidies, says DK Pant, chief economist at India Ratings. “However, if there is a push beyond the need for additional debt, it will depend on the level of government intervention,” Pant added.
The direct tax and GST surge has intensified, and if the two continue in the same clip as last year, the overall revenue slippage could be about 0.2% of GDP (6.4% of GDP for FY23 from the target of the baseline budgeted revenue deficit), According to HSBC Indian economists Pranjul Bhandari and Ayushi Chowdhury.
“But since the nominal GDP is likely to exceed the budget itself (led by a high deflator), the growth of the revenue deficit in rupee terms could be about 1.5 trillion more than the budget, unless some other expenditure is reduced. HSBC economists say.
According to economists at HDFC Bank, the fiscal deficit will grow to 6.8% of GDP in FY23, down 1.6 trillion from BE. “Predicting whether this could mean additional market debt is still early days (14.31 trillion rupees for the current total market debt FY23) or financing through alternative sources (such as small savings funds),” HDFC economists said in a note.
Of course, the government’s final financial math will depend on whether the tax collection is significantly higher than expected and if the government chooses to adjust other revenue expenditures to increase the subsidy bill or reduce the capex, they added.
A top government official told the FEI that the central government would have to moderate its spending on FY23 in addition to setting the amount of money spent to reduce the indirect taxes announced on Saturday to control inflation.