NEW DELHI: The Centre is likely to continue with its fiscal consolidation plans in the 2022-23 Budget, despite lower than estimated receipts from privatisation of state-run companies, and largely stick to its deficit targets. Robust revenues, both on the indirect and direct taxes front, are expected to provide enough headroom to the government to balance its fiscal goals and spending needs for the year ahead.
While there have been calls for relaxing the fiscal target to boost spending and help the economic recovery, it is unlikely that the government will throw fiscal caution to the wind, sources indicated to TOI. The Centre has been prudent in its spending even in the face of first wave of the pandemic and did not succumb to growing pressure from economists and the corporate sector.
Sources said the need for additional spending on healthcare, rural jobs and efforts to boost capital expenditure, especially in the infrastructure sector, would be maintained, given the need to bolster the economic recovery.
Apart from the corporate sector, many in the government also believe that capital expenditure will spur demand for sectors such as steel and cement and will result in higher investment in the coming quarters as excess capacity is used. In certain segments such as steel, companies have announced expansion plans.
In any case, the government sees it as better-quality expenditure and finance minister Nirmala Sitharaman has said that the Centre will be more than willing to allocate more funds for sectors that run out of cash. More money is expected to be allocated for the highways programme for the current fiscal year when she presents the revised estimates on February 1.
Besides, the government is keen to show that taxpayers' funds are used judiciously to ensure that the money is not splurged in repaying debt and interest payments. While the Centre has budgeted for tax revenues of over Rs 22 lakh crore during the current fiscal, interest payments will top Rs 8 lakh crore.
The twin goals of higher spending and sticking to fiscal goals would call for a balancing act, given that both fiscal and monetary policies will need to do the heavy lifting to boost growth. "Going forward, it will tread the path of fiscal consolidation without aggression for FY23. We expect the Budget to estimate the fiscal deficit ratio at 6.3% of GDP. A balancing act will send a right message to all stakeholders," said Shubhada Rao, co-founder of economic research firm QuantEco.
Since the first wave, there has been a strong recovery which has helped garner robust revenues and estimates show that they could be at least Rs 2.5 lakh crore over the budgeted amount. While receipts from privatisation may be well below the target of Rs 1.75 lakh crore, the tax receipts will fill the gap.