FM Sitharaman aims to bring down fiscal deficit amid global economic turmoil
New Delhi/IBNS: India aims to narrow its budget deficit by 50 basis points even as the country is forced to spend more on food and energy owing to the war in Ukraine, media reports said.
Finance Minister Nirmala Sitharaman wants to narrow down the shortfall in India’s spending to less than 6 percent of the gross domestic product in the year starting April 1, Bloomberg reported citing sources.
The upcoming Budget, where Sitharaman is looking to introduce the measures to lower fiscal deficit, will also be Prime Minister Narendra Modi’s last budget before the country elects a new government at the Centre in April-May 2024.
It will be a tough task as India is also facing a current account deficit with the rupee weakening to historic lows.
Subsidies on food, fertilizer and fuel will cost at least $67 billion in the year ending March 2023—or 2.1 percent of GDP—against the budget estimate of 3.2 trillion rupees ($39.2 billion), Bloomberg News reported.
The report said citing the people aware of the matter that maintaining fiscal discipline is a priority for the government as the policymakers want to ensure foreign investors see India as an attractive destination.
They are hoping that the strain on government spending would ease as commodity prices are expected to cool and the government intends to ramp up domestic production of fertilizers.
As a free food grains program that fed about 800 million people is also likely to come to an end, it would further help in bringing down the spending, the people said.
In the current year, India has budgeted a deficit of 6.4 percent of GDP, significantly down from 9.2 percent during the first year of the Covid-19 pandemic.
India plans to bring down the shortfall to below 4.5 percent of GDP by 2025-26.