1 week ago
Fiscal Deficit Seen Near 4.3% Despite West Asia Shock
The government is trying to keep its spending gap close to the number promised in the Budget.
A crisis in West Asia created worries that the gap would become much larger.
One major worry was that fertiliser subsidies would become very expensive.
However, fertiliser prices have fallen, so the extra cost may be much smaller than first expected.
The government also has a special fund that can help pay for unexpected costs.
Cutting taxes on petrol and diesel will reduce government income.
Selling some assets and controlling spending may make up for part of that lost income.
The government says it can protect investment spending while keeping the deficit near its target.
The Centre expects to keep the FY27 fiscal deficit near its original Budget Estimate of 4.3% of GDP.
Additional fertiliser subsidy needs have fallen from an initial estimate of Rs 2.7 lakh crore to potentially Rs 30,000-40,000 crore.
The Rs 1 lakh crore Economic Stabilisation Fund can help cover fiscal pressures without increasing the FY27 deficit.
A Rs 10-per-litre petrol and diesel excise-duty cut may reduce FY27 revenue by Rs 1-1.4 lakh crore.
Higher disinvestment receipts, asset monetisation and tighter spending could offset some of the revenue and subsidy pressures.
- Who
- The Centre and its officials.
- What
- The government expects to contain the FY27 fiscal deficit near 4.3% of GDP despite the West Asia crisis and a fuel excise-duty cut.
- Where
- India, with fiscal pressures linked partly to global fertiliser and fuel markets.
- When
- FY27; the Budget was presented on February 1, and the West Asia war began 27 days later.
- Why
- Lower global fertiliser prices, support from the Economic Stabilisation Fund, possible higher non-tax receipts and tighter expenditure management may offset the crisis-related pressures.
Key facts
- Original FY27 deficit target
- 4.3% of GDP
- Effective deficit after GDP revision
- 4.5% of GDP
- Economic Stabilisation Fund
- Rs 1 lakh crore
- Potential additional fertiliser requirement
- Officials estimate Rs 30,000-40,000 crore, down from an initial Rs 2.7 lakh crore estimate.
- Fuel excise-duty cut
- Rs 10 per litre on petrol and diesel
- Estimated FY27 revenue loss
- Rs 1-1.4 lakh crore
- Disinvestment and asset-monetisation target
- Rs 80,000 crore, while actual receipts could exceed Rs 1 lakh crore
Quotes
An unnamed government official
A government official discussing the projected additional fertiliser subsidy requirement
“Hopefully, the additional fertiliser requirement would be Rs 30,000-40,000 crore this year”
financialexpress.com
Sources
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