Govt expects to be close to fiscal deficit target in FY22; may infuse Rs 5,000 cr in state-owned insurers this month

Though fiscal deficit was 9.3 percent of the Gross Domestic Product (GDP) in FY21, the government expects to be “close to” the fiscal deficit target of 6.9 percent of GDP in FY22, a source told CNBC-TV18.

The government is planning to bring the fiscal deficit target below 4.5 percent of GDP by 2025-26. Fiscal deficit—total money spent by the government in excess of the total income earned—is closely tracked by the bond markets and has implications for interest rates in the system.

The government’s sale of about 5 percent stake in LIC, which was estimated to fetch around Rs 60,000 crore to the exchequer, was originally planned to be launched in March, but the Russia-Ukraine war derailed the plans.

The government had time till May 12 to launch the share sale of LIC without filing fresh papers with market regulator Sebi, an official said recently. Market stability, investor interest is key to LIC's initial public offering (IPO), the sources said.

Sources also said the government will infuse money into state-owned insurance and non-life insurance firms even as it plans to surrender a large part of the bank recapitalisation.

An amount of Rs 5,000 crore could be infused in government-owned insurance companies this month, the sources said. The government has already infused Rs 4,600 crore in Punjab & Sind Bank (PSB). In February, the PSB said its board had given the approval to raise equity capital worth Rs4,600 crore by issuing preference shares to the government. The decision was taken at the board meeting held on February 17, 2022, the bank had said in a regulatory filing.

The government's fertiliser subsidy touched Rs 85,300 crore in the first nine months of the ongoing fiscal year, the Economic Survey had stated earlier this year.  Of this, Rs 49,800 crore subsidy was on urea and the balance on phosphatic and potassium (P&K) fertilisers.

Fertiliser subsidy allocation is likely to be higher than the revised estimates of the FY22 budget, the source said. The revised estimate for the fertiliser subsidy is at Rs 1.40 lakh crore for FY22. For FY23, the subsidy is likely to be higher than Rs 1.05 lakh crore, according to the sources.

The government has been closely monitoring commodity prices, including metals and agricultural products, and all options on the table, the sources said. The government is currently in a wait-and-watch mode on oil prices and is yet to take a decision on the retail price hike.