The government could meet its fiscal deficit target of 6.4 percent for 2022-23 if there are no excise duty cuts to bring down high oil prices and additional spending on subsidies, German brokers said on Thursday.
Meeting the budget target would be achievable if there were no more excise duty cuts, said Deutsche Bank chief economist Kaushik Das.
The note said that recent excise duty cuts, coupled with higher spending on fertilizer, food and fuel subsidies have led to “upward risk” on fiscal deficit targets.
“… our analysis of fiscal arithmetic at this point shows that the central government still has the potential to hold the FY23 fiscal deficit close to the 6.4 per cent of GDP target, assuming no further excise duty cuts or/and additional spending on subsidies. announced, “he said.
However, it would be a “different story” if crude oil prices rose to more than US $ 150 a barrel this year, he said, implying the fiscal deficit could grow beyond the otherwise targeted levels.
The brokerage said its internal view was that the fiscal deficit number reached 6.5 per cent of GDP.
Clarity on whether the fiscal target can be achieved or not, and if market lending needs to be increased from the current target of Rs 14.31 lakh crore will become clearer only in the second fiscal half, when the government has sufficient data on revenue and expenditure future, he said.
Listing factors leading to concerns over the fiscal situation, it said the government reduced central excise duty on petrol by Rs 8 per liter and diesel by Rs 6 per liter, expenditure allocation for fertilizer subsidy increased by Rs 1.1 lakh crore and scheme Rs 61,000 crore for cooking gas also announced.
The note said actual revenue collection turned out to be higher than the revised estimate in FY22, which would make it easier to achieve revenue estimates for FY23 in absolute terms, but added that actual spending also turned out to be higher than estimates.
In FY23, total revenue collection could be lower around Rs 24,500 crore, given the impact of the measures listed above, he said, adding that expenditure compression was still less likely than the additional increase in subsidy bills of Rs 2 lakh crore, which meant that we should expect the total expenditure to exceed a total of at least Rs 1.3 lakh crore, he said.
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