Centre is aiming for a fiscal deficit of 6.3 per cent to 6.5 per cent of gross domestic product (GDP) for the next financial year, a less ambitious target than previously planned as COVID-19 infections threaten the economic recovery, three government officials said, NDTV report stated.
Finance Minister Nirmala Sitharaman is due to unveil the 2022-23 union budget on February 1 and officials said the thinking was that sharp cuts in government expenditure could hurt growth prospects.
India’s case load of coronavirus infections is surging, fuelled by the Omicron variant and the worry is that consumer and business spending will be hit, leaving the government with little choice but to step in.
The plan now is to target a 30-50 basis point cut in the fiscal deficit for the next financial year, the officials involved in the discussions said. They declined to be named as they were not authorised to speak to media.
Policymakers were hoping to bring down the fiscal deficit by a wider margin, after cutting the deficit by 240 basis points to 6.8 per cent in the current fiscal year ending in March.
Some private economists and brokerages said the fiscal deficit could be brought down to around 5% of GDP from 9.4% in 2020-21, after the winding down of pandemic stimulus and surge in revenue receipts.
Rising coronavirus cases have forced many states to impose restrictions, raising concerns among policymakers that falling consumer sentiment could affect the pace of the economic recovery and all budget calculations.
Asia’s third-largest economy could miss the 10% growth target for the current 2021-22 fiscal year as the new Omicron variant is seen disrupting economic activity through January-March and may also dampen sentiment in the next financial year, officials said.
And, the economic growth target would not be more than 7% for the next financial year beginning April, two officials said.
The finance minister is set to unveil new targets for government spending, tax receipts and economic growth while presenting her third annual budget in parliament.
“The (budget) discussions are on,” one of the officials said, adding the government aimed to bring down the deficit and increase capital spending while keeping revenue spending flat.
A finance ministry spokesman declined to comment for the story.