Center to tap market, NSSF to increase receipts: Capital expenditure cannot be found

In order to reduce the indirect taxes announced on Saturday to control inflation, the Center will have to moderately increase its debt as well as determine revenue expenditure, a top government official told FE.

Prior to the latest action, additional subsidy allocation in FY23 due to global price rise of commodities and extension of free ration scheme till September was expected to be offset by expected revenue year, especially tax collection. .

“There is going to be a revenue deficit now compared to the increased expenditure. However, we do not want to reduce the Capex program because it is necessary for long-term growth, ”the official said. “The revenue deficit will be met by a combination of spending calibration, mainly targeting revenue expenditure, and some debt growth – either from the market or from the National Micro Savings Fund (NSSF),” the official added.

Officials from the finance ministry will return to the drawing board soon to re-evaluate the budget in the light of the new arrangement. Of course, the amount of additional borrowing and cost reduction will depend on what the revenue stream will be in the coming months.

The disbursement target of Rs 65,000 crore is expected to exceed the target of Rs 20,000 crore due to the acquisition from LIC IPO, which has not been budgeted.

Finance Minister Nirmala Sitharaman has announced an additional expenditure of Rs 1.10 trillion for fertilizer subsidy this fiscal year – a budget of Rs 1.05 trillion. This was in line with the expectations of most analysts. In fact, Finance Secretary TV Somanathan told FE that the additional subsidy expenditure of about $ 2 trillion (including Rs. 80,000 crore in the free ration scheme) would be more or less offset by higher revenue.

The latest set of measures will result in a slightly lower revenue loss of Rs 1 trillion on FY23. If the Center has to relinquish revenue of Rs 1 trillion annually for reduction of excise duty on auto fuel, the remaining revenue loss for more than 10 months of the current financial year will be Rs 85,000-90,000 crore, the official said. If the revenue loss is added from the outgo of Rs 6,100 crore per annum for Rs.

Significantly, thanks to lower wheat harvests due to higher market rates and lower grain production, savings of around Rs 30,000 crore are expected in FY23 from the budgeted level.

The central government announced plans to borrow Rs 8.45 trillion from the market through dated securities in the first half of FY23, or about 59% of the revised full-year target, as it sought to incur front-load spending to stimulate growth.

The finance ministry, citing a switch program conducted on January 28, estimated FY23 gross market lending through dated securities at Rs 14.31 trillion, against a budget of Rs 14.95 trillion. Its Gross Market Loaning FY20 120 has risen to Rs 300 trillion. Covid prevalence, about 62% higher than the budget level.

Meanwhile, the Centre’s adoption budget from the NSSF will come down from a record Rs 5.92 trillion in FY22 to Rs 4.25 trillion in FY23. At FY20, it borrowed Rs 4.87 trillion from NSSF. In terms of recent developments, this year may be slightly higher than the budget borrowed from the NSSF.

Rating agency Icra estimates that even after the reduction in excise on fuel, the Centre’s net tax revenue will exceed the budget estimate of at least Rs 1.3 trillion. “We now expect nominal GDP to expand by about 14-15% in FY23, following the tightening of commodity prices and impact for GDP defaulters. This will help keep the revenue deficit in line with the nominal GDP for this year, “said Aditi Nair, chief economist at the agency.

The fiscal deficit budget estimate has been reduced from 6.4% of GDP in FY23 to about 6.9% in FY22.

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