India budget: Govt expected to lower deficit target for FY23

New Delhi: Robust direct and indirect tax collections are expected to give enough headroom to the Center to lower the fiscal deficit target for FY23.

Accordingly, industry watchers have estimated the FY23 fiscal deficit target to range from 5.8-6.4 per cent, the media reported this week.

The FY22 deficit has been pegged at Rs 15.06 lakh crore.

“The Budget this year will be watched out for the pace of fiscal consolidation. The balancing factor for higher spending would be next year’s divestment target, which could still be kept robust even as BPCL (and possibly even mega LIC IPO) may get pushed to next fiscal,” said Madhavi Arora, Lead Economist, Emkay Global.

“The revenue expenditure pressure may continue in FY23 with the year being a heavy election calendar in key states of Uttar Pradesh, Punjab and Gujarat, and early signs of easing consumption momentum, led by the rural areas.”

Recent data furnished by the Controller General of Accounts (CGA) showed that the fiscal deficit — the difference between revenue and expenditure — for the April-November 2021-22 period stood at Rs 695,614 crore, or 46.2 per cent of the Budget estimates (BE).

“The GoI’s FY23 fiscal deficit is expected to moderate to Rs 15.2 trillion or 5.8 per cent of the GDP from Rs 16.6 trillion or 7.1 per cent of the GDP in FY2022,” said Aditi Nayar, Chief Economist, ICRA.

“We estimate the GoI’s gross tax revenues in FY2023 at Rs 27 trillion, a YoY expansion of 9.3 per cent relative to our projected level for FY2022. The estimated growth in gross tax revenues for FY2023 is similar to our real GDP growth forecast of 9 per cent for that fiscal year, given the impact of the recent duty relief on indirect tax collections.”

In the April-November 2021-22 period, gross tax revenues displayed a robust growth of 50.3 per cent.

According to M. Govinda Rao, Chief Economic Advisor, Brickwork Ratings: “With the spill-over of disinvestment proceeds, progress in asset monetisation and continued buoyancy in tax revenues, we expect the fiscal deficit targeted at 6.3 per cent to 6.5 per cent, in the FY23 Budget.”

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