Slight shortfall in budgeted revenue and increased expenditure are going to drive up the fiscal deficit, according to CMIE
A recently released Centre For Monitoring Indian Economy (CMIE) analysis projected that the Indian government will miss its fiscal deficit target for the current financial year. According to CMIE, the total gross fiscal deficit will amount to Rs 18.4 lakh crore, which is Rs 50,000 crore more than the budgeted Rs 17.9 lakh crore.
In April-May 2023, the government was able to utilise the fiscal deficit cautiously, reaching only 11.8 per cent of the total deficit space available this year.
Compared to 12.3 per cent in the same period last year, the government was able to improve on its performance during these months. CMIE analysis suggested that few factors played out in favour of the government during this period. It said that Reserve Bank Of India (RBI) had transferred surplus amounting to around Rs 87,000 crore which helped in shoring up revenue.
On the expenditure front as well, the analysis said that the government was helped by the fact that GST shortfall payments to the states ended and there were no disbursals under the PM-Kisan yojana, which are expected to happen between July and August.
However, in the coming months, the revenue expenditure of the government will increase to more than what it had estimated. CMIE predicted that the government would spend Rs 35.7 lakh crore, Rs 70,000 crore higher than what it had budgeted for. This would happen due to the increase in spending on fertilizers subsidy and MGNREGS.
According to the analysis, government had allocated Rs 1.75 lakh crore for fertilizers subsidy and Rs 60,000 crore for MGNREGS respectively. This would overshoot to Rs 2.25 lakh crore and Rs 80,000 crore. CMIE said that the demand for employment under the MGNREGS was at a two-year high in June. It predicted that due to the employment situation and prospect of weak monsoon, the demand for employment under the scheme may continue to rise in the year.
On the revenue side as well, the government is expected to see a slight shortfall. According to the analysis, government’s revenue receipts are expected to be at Rs 27.05 lakh crore, instead of the estimated Rs 27.16 lakh crore. The major source of this shortfall would be due to the lower than estimated goods and services tax and custom duties collections.