Informist, Tuesday, Mar 21, 2023

--Govt source: Will endeavour to keep FY23 fiscal gap at 6.4% of GDP

--Not too concerned over fall in small savings net inflow

--Expecting a shortfall in customs mop-up in FY23

By Priyasmita Dutta and Sagar Sen

NEW DELHI - The government will make every effort to keep fiscal deficit at the budgeted 6.4% of GDP in the current financial year ending March, even as latest data shows nominal GDP is lower than estimated, a senior finance ministry official said.

According to the second advance estimate of national income, the nominal GDP for 2022-23 in absolute terms is projected 0.4% lower than earlier estimates. This will mean that as a percentage of GDP, fiscal deficit will rise to 6.5% even if the absolute number touches the budgeted 17.55 trln rupees.

"Now that a new number has come up, which might again change in May, we will endeavour to remain at 6.4%," the official told Informist. "GDP is not under my control, when we accounted for it, it was 273 (trln rupees), now it is 272 (trln rupees), so I'm not even looking at it."

The ministry is "faithfully" committed to the number given in the Budget, the official said. "We will be on track as far as the absolute numbers are concerned. Budgeted numbers will be met," the official said.

According to the revised Budget estimate, fiscal deficit in 2022-23 is projected at 17.55 trln rupees, or 6.4% of GDP. 

The official said the government is not "too concerned" with the fall in net inflows into small savings schemes despite the recent increases in interest rates on these schemes. According to Controller General of Accounts data, net inflows into small savings schemes in Apr-Jan contracted 13.3% on year to 1.91 trln rupees.

Inflows into small savings schemes have been falling on year since June as rising market interest rates have made alternative investment options, such as bank deposits, more attractive after the Reserve Bank of India started hiking interest rates in May to control inflation.

Small savings collections are crucial since they account for about 25% of the government's total borrowings to finance the fiscal deficit in 2022-23. The revised Budget estimate for borrowing from small savings fund for 2022-23 is 4.39 trln rupees. A sharp fall in small savings collections could complicate financing of fiscal deficit this year.

GOVERNMENT RECEIPTS

The government is bracing for a 170-180 bln rupee shortfall in disinvestment receipts, the official said. The Budget has projected disinvestment receipts of 600 bln rupees in 2022-23, including 100 bln rupees from asset monetisation. The financial year is drawing to a close and the government has so far raised only 311 bln rupees from disinvestment in public sector companies.

Given the tight fiscal rope, the government is unlikely to cut excise duty on auto fuels or customs duty on some food items to rein in inflation, another finance ministry official said. "We cannot cut our taxes any more this year; it will impact our revenues and that we cannot afford at this point in time," the official said.

Some media reports had last month said that the government could consider reducing taxes on some items like maize and fuels to rein in retail inflation.

India's annual inflation rate, based on the Consumer Price Index, was at 6.44% in February, the second consecutive month of the headline number breaching the upper-bound of the Reserve Bank of India's medium-term target of 2-6%.

The government cannot cut import duties because there may be a shortfall in customs duty collection this year. "The overall tax collections are good, but we are expecting a shortfall on the customs side," the official said. 

The revised Budget estimates peg the total mop-up from customs at 2.10 trln rupees in 2022-23. Till the end of January, the government had collected 1.73 trln rupees, or 82.4% of the total aim.  End

Edited by Ranjana Chauhan

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

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Informist, Tuesday, Mar 21, 2023

--Govt source: Will endeavour to keep FY23 fiscal gap at 6.4% of GDP

--Not too concerned over fall in small savings net inflow

--Expecting a shortfall in customs mop-up in FY23

By Priyasmita Dutta and Sagar Sen

NEW DELHI - The government will make every effort to keep fiscal deficit at the budgeted 6.4% of GDP in the current financial year ending March, even as latest data shows nominal GDP is lower than estimated, a senior finance ministry official said.

According to the second advance estimate of national income, the nominal GDP for 2022-23 in absolute terms is projected 0.4% lower than earlier estimates. This will mean that as a percentage of GDP, fiscal deficit will rise to 6.5% even if the absolute number touches the budgeted 17.55 trln rupees.

"Now that a new number has come up, which might again change in May, we will endeavour to remain at 6.4%," the official told Informist. "GDP is not under my control, when we accounted for it, it was 273 (trln rupees), now it is 272 (trln rupees), so I'm not even looking at it."

The ministry is "faithfully" committed to the number given in the Budget, the official said. "We will be on track as far as the absolute numbers are concerned. Budgeted numbers will be met," the official said.

According to the revised Budget estimate, fiscal deficit in 2022-23 is projected at 17.55 trln rupees, or 6.4% of GDP. 

The official said the government is not "too concerned" with the fall in net inflows into small savings schemes despite the recent increases in interest rates on these schemes. According to Controller General of Accounts data, net inflows into small savings schemes in Apr-Jan contracted 13.3% on year to 1.91 trln rupees.

Inflows into small savings schemes have been falling on year since June as rising market interest rates have made alternative investment options, such as bank deposits, more attractive after the Reserve Bank of India started hiking interest rates in May to control inflation.

Small savings collections are crucial since they account for about 25% of the government's total borrowings to finance the fiscal deficit in 2022-23. The revised Budget estimate for borrowing from small savings fund for 2022-23 is 4.39 trln rupees. A sharp fall in small savings collections could complicate financing of fiscal deficit this year.

GOVERNMENT RECEIPTS

The government is bracing for a 170-180 bln rupee shortfall in disinvestment receipts, the official said. The Budget has projected disinvestment receipts of 600 bln rupees in 2022-23, including 100 bln rupees from asset monetisation. The financial year is drawing to a close and the government has so far raised only 311 bln rupees from disinvestment in public sector companies.

Given the tight fiscal rope, the government is unlikely to cut excise duty on auto fuels or customs duty on some food items to rein in inflation, another finance ministry official said. "We cannot cut our taxes any more this year; it will impact our revenues and that we cannot afford at this point in time," the official said.

Some media reports had last month said that the government could consider reducing taxes on some items like maize and fuels to rein in retail inflation.

India's annual inflation rate, based on the Consumer Price Index, was at 6.44% in February, the second consecutive month of the headline number breaching the upper-bound of the Reserve Bank of India's medium-term target of 2-6%.

The government cannot cut import duties because there may be a shortfall in customs duty collection this year. "The overall tax collections are good, but we are expecting a shortfall on the customs side," the official said. 

The revised Budget estimates peg the total mop-up from customs at 2.10 trln rupees in 2022-23. Till the end of January, the government had collected 1.73 trln rupees, or 82.4% of the total aim.  End

Edited by Ranjana Chauhan

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2023. All rights reserved.