homevideos Newseconomy NewsExpect India to have sustainable fiscal deficit by 2025 2026, says expert

Expect India to have sustainable fiscal deficit by 2025-2026, says expert

India’s fiscal position in the current year is opposite of what we see every year. The government – centre and states - have more money than they have been able to spend.

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By Latha Venkatesh  Nov 18, 2022 9:48:42 PM IST (Published)

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India’s fiscal position in the current year is the opposite of what we see every year. The Centre and states have more money than they have been able to spend.

Sample this: Central government tax revenues were expected to grow by 1.8 percent for the full year, but they have actually grown by 17.6 percent in the first half. That's because direct taxes have grown by 23.5 percent, versus a budgeted increase of 2.5 percent.
However, non-tax revenues like divestment and dividend are expected to be much lower. But the government may still have at least Rs 1 trillion more in income according to a CNBC-TV18 poll.
On the flip side, expenses are also far higher than budgeted. The government's food, fertiliser, and LPG subsidies are expected to be higher by Rs 2-2.5 trillion. Fertiliser subsidy could be double of what was budgeted because of higher global chemical prices. Food subsidy could be higher by about Rs 80,000 crore because of the extension of the Anna Yojana, and LPG subsidy is also higher.
A CNBC-TV18 poll indicated that the government’s fiscal deficit could be higher by Rs 1-1.1 trillion.
So, how will the government fund this extra deficit is one question? A second question rises with respect to states, which are also flooded with more money. ICRA has calculated that by counting the devolution from the Centre and the interest-free loans, the states can spend Rs 7.4 trillion on capex. But last year they spent only Rs 4.4 trillion in the full year.
Speaking to CNBC-TV18, Pinaki Chakraborty, former director of NIPFP said he expects India to have a sustainable fiscal deficit by 2025-2026.
“Going forward I expect India to have a lower fiscal deficit as a percentage of GDP. States also have been able to control their fiscal deficit to a great extent. So overall I think our fiscal numbers will be stable and we will be on a path to the sustainable fiscal deficit by 2025-2026,” Chakraborty said.
Watch the video for the entire conversation.

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