In order to keep its fiscal math in shape, the Indian government is planning to borrow more than budgeted this financial year and reduce revenue expenditure, said a Mint report.
"The government may borrow more than budgeted this fiscal, reduce revenue expenditure, or do both, as the recent duty cuts and subsidy hikes threaten to upset its fiscal math," the report said quoting a government official aware of the discussions.
"The additional borrowing requirement will be worked out later as the fiscal year has just started," the report further added.
To tame inflation, the Finance Minister of India on May 21 announced the cut on excise duty on petrol and diesel by ₹8 and ₹6 per liter, respectively, taking the excise duty to ₹20 and ₹15.8 from ₹28 abd ₹21.8 per liter. As per the estimates of brokerage firm Motilal Oswal Financial Services, the government is likely to fall short on its excise duty collection by nearly ₹85,000 crore on account of this measure.
In April the government announced a fertilizer subsidy hike and now this reduction of duties on petrol, diesel and imported inputs to make steel and petrochemicals will mean the gross market borrowing of ₹14.3 trillion budgeted for FY23 won’t be enough for the year.
The government has allocated an additional ₹1.1 lakh crore for fertilizer subsidy over the ₹1.05 lakh crore already announced in Union Budget FY23. Additionally, it plans to provide ₹200 per gas cylinder as a subsidy, costing the exchequer ₹6,100 crore. It also plans to reduce customs duty on raw materials for plastics, iron, and steel, brokerage firm Motilal Oswal pointed out.
"Overall, the government has announced an additional expenditure of ₹1.96 lakh crore in FY23 so far (including food subsidy). Assuming no further change in expenditure and government tax receipts remain buoyant, and the fiscal deficit in FY23BE may come in at 6.9 percent of GDP, which is 0.5 percent higher than the government estimate of 6.4 percent of GDP," said Motilal Oswal.
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