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<\/p>\nWhile presenting her 2021-22 Union Budget, Finance Minister Nirmala Sitharaman had set a fiscal deficit target of 6.8 per cent of nominal gross domestic product (GDP) against the 2020-21 Revised Estimate of 9.5 per cent.<\/p>\n
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The fiscal correction in the upcoming 2022-23 Union Budget is unlikely to be that steep.<\/p>\n
Even as discussions among top Budget-makers are ongoing, the fiscal deficit target for 2022-23 may likely be in the range of 6.5-6.8 per cent.<\/p>\n
This draws from two factors.<\/p>\n
First, the Centre is unlikely to meet this year’s fiscal deficit target due to a higher expenditure burden, and also the divestment target of Rs 1.75 trillion.<\/p>\n
Second, the pre-pandemic medium-term fiscal deficit target of 3 per cent of GDP all but seems to be buried, which means the ‘glide path’ in the coming years is likely to be a gentle slope, instead of a sharp year-on-year decline in targets.<\/p>\n
The NITI Aayog is said to have suggested that the finance ministry should not rush to a lower fiscal deficit in the next fiscal year, as stepping up capital expenditure will help economic recovery, create jobs, and boost demand.<\/p>\n
“There is still uncertainty around the Omicron variant, and hence around economic recovery.<\/p>\n
“Some fiscal breathing space will be required next year as well, as we see spending commitments on welfare schemes, continued thrust on public investment and sector-specific interventions, if required,” said a senior government official.<\/p>\n
For the current year, the ministry has been rather conservative in its tax revenue targets; hence, collections are poised to be much higher than budgeted as the economy shows a strong recovery.<\/p>\n
For next year, the Centre could be conservative with its expenditure targets, i.e. over-provision spending in some areas.<\/p>\n
Allocations for booster shots of Covid-19 vaccines, health sector, welfare schemes for the poor, food subsidy, and capital expenditure are going to the focus areas in terms of expenditure for 2022-23, according to officials.<\/p>\n
They privately conceded that the fiscal deficit target for 2021-22 was under stress.<\/p>\n
On one hand, revenue collections have been rather healthy.<\/p>\n
The advance tax mop-up for the October-December quarter almost doubled from the same period last year to Rs 94,107 crore.<\/p>\n
Recently, the finance ministry informed Parliament that the Centre’s net income tax revenue from April to December 7 stood at Rs 7.39 trillion.<\/p>\n
The net income tax collection during the entire lockdown-hit FY21 was Rs 9.45 trillion.<\/p>\n
The collection during the pre-pandemic year of FY20 was Rs 10.51 trillion.<\/p>\n
Budget-makers are confident that the net tax collection’s Budget target (direct plus indirect) of Rs 15.45 trillion will be exceeded.<\/p>\n
Gross goods and services tax (gross GST) collection for November had come in at Rs 1.32 trillion — the second-highest not only this year but also since the introduction of the nationwide tax.<\/p>\n
Total gross GST collection for April-November was Rs 7.02 trillion against Rs 8.66 trillion in the entire FY21 and Rs 9.44 trillion in FY20.<\/p>\n
Non-tax revenue is also expected to be healthy due to the surplus from the Reserve Bank of India and dividends from state-owned entities.<\/p>\n
But all this is offset by a higher expenditure burden because of the free food programme for the poorest, a much higher-than-expected fertiliser subsidy burden, sector-specific measures to help economic recovery, and the Centre taking on the entire burden of vaccination from states.<\/p>\n
In the ongoing Winter Session, the government has sought Parliamentary approval for an additional spending burden of Rs 2.99 trillion.<\/p>\n
Then there is divestment.<\/p>\n
Tuhin Kanta Pandey, secretary, department of investment and public asset management, tweeted on Sunday that Life Insurance Corporation is slated to go for its initial public offering in the January-March quarter.<\/p>\n
However, many within the government feel that Bharat Petroleum’s privatisation will not be possible this year.<\/p>\n
“Just because we managed to sell Air India does not mean that BPCL’s sale will suddenly be sped up. Privatisation is a complex process. LIC will be done as the government has had a long experience in IPOs,” said a second official.<\/p>\n
“The additional tax revenue will make up for any shortfall in divestment.<\/p>\n
“But they won’t make up for the additional expenditure burden.”<\/p>\n