India’s fiscal deficit may breach the 5.9% of GDP target for this year and could hit 6%, even though tax collections have been buoyant and may offset a wide shortfall in disinvestment outcomes, due to the likelihood of revenue spending exceeding the Budget Estimate by about ₹2 lakh crore, India Ratings and Research said on December 26.
The Centre has recently secured Parliamentary approval for the first supplementary demand for grants this year, involving an additional cash outgo of ₹53,378 crore, lifting its total spending commitment for 2023-24 to ₹45.6 lakh crore, including about ₹35.6 lakh crore of revenue expenditure and ₹10.1 lakh crore of capital expenditure.
“However, India Ratings believes, like in the past, there will be a second supplementary demand for grants, as a result of which the revenue expenditure is expected to increase to ₹37.1 lakh crore, over ₹2 lakh crore higher than budgeted for the year,” its economists noted.
“Higher-than-budgeted revenue expenditure triggered through the first and likely second supplementary demand for grants in combination with lower-than-budgeted nominal GDP will push the fiscal deficit to 6% of GDP,” they concluded.
A major reason for the increased expenditure would be higher expenditure by a few select Ministries and recouping of over ₹28,000 crore to the Contingency Fund of India which was drawn by 30 departments as an advance in the past, they said.
In the first supplementary demand for grants, the government sought more funds for priority areas like food, fertilizer, and LPG subsidy, and the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).
Under the MGNREGS, for instance, almost ₹80,000 crore had been spent by December 19, compared with the Budget Estimate of ₹60,000 crore. The government’s supplementary demands included a top-up of ₹14,524 crore for the scheme.