BUDGET EXPECTATIONS: Fiscal consolidation is necessary and expected

17 Jan 2023 , 02:52 AM

The important challenge before the government in Budget FY 24 is how to keep fiscal deficit in control while also providing enough stimulus to accelerate growth in the economy. According to an estimate of credit rating agency ICRA,  fiscal deficit target of the government for FY 24 is likely to be 5.8% of GDP. In FY 23, this target was 6.4% of GDP. ICRA also forecasts that the government will be able to achieve its fiscal deficit target for FY 23. 

2023 is the last year before general elections. Globally there is a severe economic slowdown. This economic slowdown is all set to worsen this year. The Government therefore cannot afford to reduce its expenditure in order to control fiscal deficit. It is unlikely that subsidies on fertilizer, food etc. will be cut down in the year before the election year.

Pradhan Mantri Garib Kalyan Ann Yojna (PMGKAY) was discontinued recently. But this was offset by the announcement that the poor will now get 5 kg of grains per month per person, free of cost, under National Food Security Act. 

The government is likely to accelerate the pace of its capital expenditure in FY 24 budget. Some of the capital expenditure is likely to go towards the rural parts of the country. These parts have been severely hit by the reverse migration caused by Covid lockdowns.