Pointers at Glance
- Government officials closely watch the spending to complement the RBI’s measures to avoid fiscal slippage.
- The finance ministry will inform ministries and departments not to anticipate additional funds in the revised estimates for revenue expenditure.
Government officials said that they would closely watch its spending to complement the measures of RBI to contain inflation and manage the external account amid capital outflows. The finance ministry will inform ministries and departments not to expect additional funds in the revised estimates for revenue expenditure.
The government is being cautious as fiscal slippage could undermine the efforts of RBI to manage inflation. A senior government official said ministries and departments must stick to budget estimates.
Revenue Expenditure May Be Avoided
The official said there is little scope for additional provisioning, and there could be cuts in revenue expenditure. There will not be any cut in capital expenditure budgeted at INR 7.5 lakh crore in the current fiscal. As per the report by ET, the government may not present a supplementary demand for grants in the monsoon session that’s just started.
The fiscal deficit for Financial Year 2023 is at INR 16.6 lakh crore or 6.4% of GDP. The government faced a spike in food and fertilizer subsidies and had to reinstate support for cooking gas to shield consumers.
It took a hit because of the cut in excise on petrol and diesel to decrease soaring fuel retail prices on the revenue side. The lower revenue and higher expenditure had raised concerns that the fiscal slippage could stoke inflation, undermining efforts by the RBI.
Consumer inflation has eased from the eight-year peak of 7.8% in April to 7% in June but has stayed outside RBI’s 2-6% target range for six consecutive months.
The central bank quickly raised its key policy rate by a cumulative 0.9 percentage point in May and June. It is widely expected to impose another steep increase at the upcoming August 2-4 monetary policy review.
Fiscal concerns have eased slightly after the government imposed a ‘windfall’ tax on domestic crude and an export levy on fuel exports, which is expected to yield about INR 1 lakh crore.
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