The fiscal deficit is bigger than what was estimated in the budget but the government will not cut capital expenditure (capex) to contain the fiscal deficit, Mint reported finance secretary T.V. Somanathan saying so.
"While a widening fiscal deficit may spell bad news at first glance, Somanathan made it clear the government will not cut capital expenditure to contain the fiscal deficit," Mint report said.
As Mint reported earlier, higher expenditure shot up India's fiscal deficit between April and May to ₹2,03,921 crore, or 12.3% of the year-to-March budgeted target. The fiscal deficit was at 8.2 per% of the Budget Estimate (RE) of FY22 during the corresponding period.
A fiscal deficit is a difference between the total expenditure and revenue of the government. It is an indication of the total borrowings that are needed by the government.
For 2022-23, the fiscal deficit of the government is estimated to be ₹16,61,196 crore. In the Union Budget, the government estimated the deficit to be 6.4% of GDP.
The rupee's fall against the dollar, higher commodity prices and tax cuts are seen as the biggest reasons behind the widening fiscal deficit.
Somanathan expects higher-than-expected inflation and nominal GDP to help moderate the fiscal deficit when measured as a ratio of gross domestic product. Nominal GDP growth is likely to be higher than 11.1%, Somanathan said, as per Mint.
