Finance ministry sources said they have the cushion to absorb the extra financial burden on account of higher fertiliser and food subsidies, but if more relief is provided on any account then additional funds may be needed. “Centre may go for an additional `1 lakh crore borrowing in the second half if it needs to,” another official said, adding that there will be no cut in capital expenditure.
Saturday’s reduction in excise duty on diesel and petrol is expected to cause Rs 1 lakh crore annual loss in tax revenue while subsidy on cooking gas will cost the government Rs 6,100 crore a year.
The Centre is also expecting a revenue loss of about Rs 20,000 crore on the reduction in duty on certain steel items, coking coal and inputs for plastics among others. Food and fertiliser subsidies are expected to cost Rs 1.80 lakh crore more than budgeted.
Given the high inflation and rising current account deficit, the government needs to keep the fiscal deficit in check to support the central bank in inflation management.
Officials said they do not see any major deviation from the fiscal deficit target of 6.4% of GDP in the financial year.
Experts say conservative budget estimates and buoyancy in tax revenue are likely to help the Centre avoid significant slippage, but a small deviation is possible. “We raise our FY23 fiscal deficit forecast to 6.8% of GDP from our earlier expectation that the government will meet the budget target (6.4% of GDP),” Nomura said in its recent note.
The Centre has budgeted Rs 14.31 lakh crore borrowing in the current fiscal year. According to borrowing calendar announced earlier, it will raise `8.45 lakh crore in first half of FY23 and the balance in second half of the fiscal.