Centre chose expenditure switch to contain widening fiscal deficit

Robust revenue collection and higher nominal GDP, however, led to an improved fiscal deficit at 6.7 per cent in FY22 against the 6.9 per cent estimated

fiscal deficit
Illustration: Binay Sinha
Asit Ranjan Mishra New Delhi
3 min read Last Updated : Jun 03 2022 | 6:10 AM IST
Higher expenditure by some ministries in FY22 was balanced by lower spend on the part of others, including social sector departments, to keep the fiscal deficit in check, the latest Controller General of Accounts (CGA) data has showed.

In FY23, when the government has decided to prune revenue expenditure, experts say it may follow a similar balancing approach.

According to the CGA data for FY22, while the government overshot its revenue expenditure at 101 per cent of its Revised Estimates (RE), it fell short on its capital expenditure at 98.5 per cent of the RE. Expenditure by the Ministry of Mines (286 per cent), Ministry of Power (141 per cent), Ministry of Labour and Employment (169 per cent), Ministry of Housing and Urban Affairs (145 per cent), Ministry of Jal Shakti (121 per cent), Ministry of Railways (113 per cent), and Ministry of Chemicals and Fertilisers (109 per cent) overshot the RE significantly.

The government saved more than Rs 45,000 crore from the under-utilisation of funds by the top 10 departments and ministries. These include social sector ministries such as the Ministry of Social Justice and Empowerment, Department of Higher Education, and Ministry of Women and Child Development.

Robust revenue collection and higher nominal GDP, however, led to an improved fiscal deficit at 6.7 per cent in FY22 against the 6.9 per cent estimated.

The government will make efforts to cut revenue expenditure to offset the impact of more than Rs 1.5 trillion forgone on account of measures to rein in inflation, Finance Secretary T V Somanathan told Business Standard on Tuesday.

The government on May 21 slashed central excise duty on petrol by Rs 8 a litre and on diesel by Rs 6 a litre. Making the announcement on Twitter, Union Finance Minister Nirmala Sitharaman said this would lead to a revenue loss of about Rs 1 trillion per annum.

Apart from the excise duty cuts, the government will bear an additional Rs 1.10 trillion as fertiliser subsidy on account of the fact that commodity prices have gone up due to Russia’s invasion of Ukraine. Finance ministry officials have made it clear the government does not intend to cut capital expenditure of Rs 7.5 trillion in FY23.

In the FY23 Budget, the government had made a significant increase in allocations for roads and bridges (Rs 66,491 crore) for the National Highways Authority of India and capital expenditure for Bharatnet. Apart from this, there were provisions for capital infusion into Bharat Sanchar Nigam Ltd for 4G spectrum, technology upgrade, and restructuring (Rs 46,478 crore); higher requirements for railway capital works (Rs 20,000 crore); pay and allowances of service personnel and procuring equipment by the Army and Air Force (Rs 16,953 crore), among others.

Kotak Mahindra Bank in a report released on Wednesday said unless matched by lower expenditure, additional expenditure will lead to around Rs 1.5 trillion of additional market borrowing. “Without any expenditure cuts, we pencil in FY23E fiscal deficit at 6.8 per cent of GDP against budgeted 6.4 per cent,” it added.

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Topics :Fiscal DeficitIndian EconomyGDPIndia GDP growthExpenditure

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