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Burgeoning fiscal deficit will be a challenge for govt in FY 2023-24
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IANS | 31 Dec, 2022
With
the next financial year (2023-24) just a quarter away, India will need
to do a tight ropewalk to check its burgeoning fiscal deficit and
current account deficit.
India's fiscal deficit widened
to Rs 9.78 lakh crore for the April-November period of 2022-23, which is
58.9 per cent of the Budget target of Rs 16.61 lakh crore for the
current fiscal, according to data released by the Controller General of
Accounts (CGA) on Friday. During the corresponding period of last year,
fiscal deficit was at 46. 2 per cent of the Budget target.
Fiscal
deficit till October in the current financial year had touched Rs 7.58
lakh crore, or 45.6 per cent of annual estimates, as per the official
data. During the corresponding period of last year, it was 36.3 per cent
of the budget estimates of 2021-22.
A fiscal deficit is a difference between the state's revenue and spending. It shows the shortfall in revenue.
With
continuous rise in India's fiscal deficit, economists are of the view
that if the fiscal deficit continues to widen in 2023-24, it will
further push interest rates up, which will hurt the private sector and
put pressure on the government's ability to invest in infrastructure.
They
say that India's current account deficit will also need huge foreign
investments in the coming days to compensate for the shortfall in
domestic savings.
However, with India's current account deficit
also surging to an all-time high of $36.4 billion in the July-September
period of 2022-23, it may diminish India's appeal as a global investment
destination and also push capital costs, they added.
While
presenting the Union Budget for 2022-23 on February 1, 2022, Finance
Minister Nirmala Sitharaman had set a fiscal deficit target at 6.4 per
cent of GDP for 2022-23, compared to 6.7 per cent in the previous
financial year of 2021-22.
For 2022-23, the fiscal deficit is estimated to be Rs 16.61 lakh crore or 6.4 per cent of the GDP.
However,
the target seems to be an ambitious one, looking at the current
economic scenario prevailing in the country as well as the latest
figures.
According to a report by SBI's research team, India's
fiscal deficit in the current fiscal is expected to be in the range of
6.5 per cent, as against the budget estimate of 6.4 per cent.
Fiscal
deficit for the first quarter of the current financial year reached
21.2 per cent of the annual target, compared to 18.2 per cent in the
corresponding period of last year, the SBI report said.
Tax
revenue has been robust with record high GST revenues which have been
possible because of increased compliance and higher economic activity.
However,
the SBI report noted that on the expenditure side, the government has
incurred higher capital expenditure (23.4 per cent of budgetary
estimates in 2022-23 compared to 20.1 per cent of budgetary estimates
during the same period in 2021-22).
In the past few fiscals too, the picture has not been exactly rosy, if one goes by RBI's figures.
RBI
has said that the gross fiscal deficit of the Indian states rose nearly
79 per cent after the lockdown. According to its latest data, the
fiscal deficit rose from Rs 5 lakh crore in 2019-20 to Rs 9.3 lakh crore
in 2020-21. In 2021-22, the deficit fell to Rs 8.1 lakh crore but stood
much higher than the pre-pandemic level.
The data released in
RBI's Handbook of Statistics on the Indian states showed that except
Arunachal Pradesh, Haryana, Sikkim and Odisha, all the states saw a
higher fiscal deficit in 2020-21 as compared to 2019-20.
In the
case of the Central government, the fiscal deficit jumped from 4.6 per
cent in 2019-20 to 9.3 per cent of the GDP in 2020-21.
Amid a
tough fiscal scenario, keeping fiscal deficit and current account
deficit in check would be no cakewalk for the government in the new
year.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
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66.20
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64.50 |
UK Pound
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87.50
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84.65 |
Euro
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78.25
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75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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