Higher cost of production due to the elevated cost of gas could increase the subsidy outgo on fertilisers during 2023-24 as would the extension of the free foodgrain scheme beyond December 2023 Fertiliser subsidy outgo during 2022-23 is estimated to be around Rs 2.25 lakh crore against a budget estimate (BE) of Rs 1.05 lakh crore. In the Budget for 2023-24, finance minister Nirmala Sitharaman informed that the government was set to achieve the fiscal deficit target of 6.4 percent of the gross domestic product (GDP) for the financial year 2022-23. This was despite substantial slippages in the expenditure on fertilisers and food subsidies. Fertiliser subsidy outgo during 2022-23 is estimated to be around Rs 2.25 lakh crore against a budget...
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Category: Fiscal deficit/subsidies
Budget 2023 targets inclusive growth
The Finance Minister has given a push to growth through a judicious blend of encouraging investment and consumption Guided by the overriding objective of laying the foundation of putting India on a rapid and sustainable growth trajectory, for three years in a row, the Narendra Modi government has presented an investment-led Budget. Most of the budgetary allocations are going into building infrastructure, while the government has taken measures to promote investment by the private sector. The Budget for 2023-24 continues with this overarching strategy. In her maiden Budget for 2019-20, Finance Minister Nirmala Sitharaman had laid a roadmap for catapulting the Indian economy to $5 trillion by 2024-25. In sync with this target, she had projected an investment requirement of...
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Tax surge a cushion to bear hit from subsidies
But tax collection buoyancy has been slowing down since the last year, which calls for tightening slippages In the past, a shortfall in tax receipts of the Union government vis-à-vis the budget estimate (BE) and excess of expenditure over BE led to high fiscal deficit (FD) year after year. To rein in FD, it often took recourse to non-tax receipts such as dividend from public sector undertakings (PSUs), proceeds from selling government shares in one PSU to another, transfer of surplus by the Reserve Bank of India (RBI), proceeds from sale of spectrum for telecom services, etc. This was unsustainable as reliance on non-tax receipts is unreliable. For instance, dividend from a PSU depends on a host of factors specific...
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Shun freebies, avoid bankruptcy
The reckless spending of taxpayers’ money on ‘freebies’ is neither recognised policy/custom nor sanctioned in a court of law. Credit: DH File Photo Hearing a PIL seeking directions against ‘freebies’ on August 3, the Supreme Court sought suggestions on the composition of a committee that can go into the issue “dispassionately” and make recommendations. It gave a sense that it is for Parliament, besides the Election Commission, to take the initiative to enact a law on curbing freebies. The Union government’s standards of financial propriety clearly lays down that “no authority shall exercise its powers of sanctioning expenditure to pass an order which will be directly or indirectly to its advantage; and the expenditure from public moneys should not be...
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Financial discipline a must for states
The Centre has to crack the whip on growing trend of states going for excessive borrowings else it could lead to a major financial crisis In recent years, indiscriminate borrowings by entities of the state governments, leveraging guarantees, has raised alarm bells. In June, 2022, the Reserve Bank of India (RBI) lambasted banks, mostly public sector banks (PSBs), for lending to such entities based on the escrow of the states’ future revenue streams or using collectorates and courts as security. The RBI sought a review of such lending practices by the bank boards and reported compliance by September, 2022. The Union Finance ministry was more emphatic, seeking an end to the practice. The warning is a follow up to a...
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India faces sharp fiscal deficit slippage
International crude and fertiliser prices disturbed Government’s budget calculations; welfare expenses are adding to fiscal stress The Modi government has taken a number of measures, including tax cuts and increase in subsidy, to give protection to consumers from the steep rise in international prices of fuel, fertilisers, and food. But it could come at a huge cost in terms of impairing the Centre’s ability to achieve the fiscal deficit (FD) target of 6.4 per cent of the gross domestic product (GDP) set for the current financial year (FY). Before analysing the numbers for the current FY, let us see how things panned out during 2021-22 when India was confronted with rising international prices of the aforementioned commodities. During 2021-22, thanks...
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Tax buoyancy is a good omen
Efforts to boost tax revenue will come to naught if expenses, particularly on ‘welfare schemes’, are allowed to grow in an unsustainable manner For years, the tax receipts of the Union Government have consistently fallen short of the target set in the respective year which together with the expenditure exceeding the target has led to fiscal slippage – a glamorous term for the fiscal deficit (FD). Against this dismal record in the past, 2021-22 will have the unique distinction of the tax collections – both direct and indirect – exceeding the target. The total direct tax collection net of refund as on March 16, 2022 stood at around Rs 1363,000 crore which is higher the budget estimate (BE) of Rs...
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Tax buoyancy – a good omen
For years, the tax receipts of Union government have consistently fallen short of the target set in the respective year which together with the expenditure exceeding the target has led to fiscal slippage – a glamorous term for the fiscal deficit or FD (excess of total expenditure over the total receipts). Against this dismal record in the past, 2021-22 will have the unique distinction of the tax collections – both direct and indirect – exceeding the target. The total direct tax collection (includes primarily personal income tax or PIT and corporate income tax or CIT) net of refund as on March 16, 2022 stood at around Rs 1363,000 crore which is higher the budget estimate (BE) of Rs 1100,000 crore...
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2022-23 budget – avoid a debt trap
The Union Budget for 2022-23 provides for capital expenditure of Rs 750,000 crore which is a jump of over 35 percent from the budget estimate (BE) of Rs 554,000 crore for 2021-22 (revised estimate (RE) for the current year is Rs 604,000 crore which is more or less close to the BE when we exclude Rs 50,000 crore given to Air India Asset Holding Company Limited AIAHCL where the debt of now divested Air India resides). Considering that the BE for current year was 26 percent higher than the RE of Rs 439,000 crore during 2020-21, this sounds impressive. However, when seen in juxtaposition with over Rs 100,00,000 crore investment needed to build infrastructure over five years – for catapulting...
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Fiscal splurge has continued unabated
There has been no major event or budget announcement that could qualify as ‘far-reaching structural reform with unanticipated fiscal implications’ Even as the Finance Minister Nirmala Sitharaman prepares for the next budget, it is time to take stock of the fiscal scenario. During 2019-20, the revised estimate (RE) of fiscal deficit (FD) was 3.8 percent of GDP against the budget estimate (BE) of 3.3 percent. In her speech on the Union Budget for 2020-21, she had justified this in terms of the recommendation of the NK Singh Committee on review of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 which permits breach of the target in case of “far-reaching structural reforms with unanticipated fiscal implications.” For 2020-21, she had...
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