Finance ministry sources said they have cushions to absorb the extra financial burden due to higher fertilizer and food subsidies, but additional funding may be needed if any accounts are given more relief. “If the center needs it, it can borrow an additional` 1 lakh crore in the second half, “another official said, adding that there would be no cuts in capital expenditure.
The reduction in excise duty on diesel and petrol on Saturday is expected to result in an annual loss of Rs 1 lakh crore in tax revenue, while subsidies on cooking gas will cost the government Rs 6,100 crore a year.
The Center is expecting a revenue loss of about Rs 20,000 crore by reducing tariffs on some steel items, coking coal and plastic inputs. Food and fertilizer subsidy is expected to cost Rs 1.80 lakh crore more than the budget.
In the face of high inflation and a growing current account deficit, the government needs to control the revenue deficit to help the central bank manage inflation.
Officials say they do not see any major deviations from the fiscal deficit target of 6.4% of GDP in the fiscal year.
Experts say conservative budget estimates and tax revenue surges will help the center avoid significant slips, but a small deviation is possible. Nomura said in a recent note, “We have raised our FY23 fiscal deficit forecast to 6.8% of GDP from our previous expectation that the government will meet the budget target (6.4% of GDP).”
The Center has budgeted Rs 14.31 lakh crore for borrowing in the current financial year. According to the previously announced debt calendar, it will balance Y 8.45 trillion in the first half of FY23 and in the second half of fiscal year.