A miss in the disinvestment target may cause the government’s fiscal deficit to rise at Rs 16.6 lakh crore or 7.1 per cent of the GDP in the current financial year, rating agency ICRA said in a report.
With the state governments’ fiscal deficit projected at a relatively modest 3.3 per cent of GDP in 2021-22, the general government fiscal deficit is estimated at around 10.4 per cent of the GDP, the agency said in a report.
In the base case for 2022-23, the agency sees the government’s fiscal deficit moderating to Rs 15.2 lakh crore or 5.8 per cent of GDP.
Although the planned ceasing of GST compensation could cause the state governments’ fiscal deficit to rise to the cap of 3.5 per cent of the GSDP set by the Fifteenth Finance Commission, the general government deficit will still compress to 9.3 per cent of the GDP in 2022-23, it said.
ICRA’s chief economist Aditi Nayar said that with a palpable buoyancy in tax collections, the government’s gross tax receipts is expected to overshoot the budgeted amount by a healthy Rs 2.5 lakh crore in FY2022.
However, the net tax revenue gains to the government will be nullified by the expected large miss on receipts from disinvestment and back-ended spending, especially on those items that were included in the Second Supplementary Demand for Grants, such as food and fertiliser subsidies, equity infusion into Air India Assets Holding Limited, etc, she said.
“Consequently, we expect the government’s fiscal deficit to print at Rs 16.6 lakh crore in FY2022, exceeding the budgeted amount of Rs 15.1 lakh crore,” Ms Nayar addd.
Ms Nayar added that the union budget for 2022-23 will face some constraints, owing to an expected slowdown in the growth in indirect taxes following the excise relief provided recently, and the moderation in nominal GDP growth to around 12.5 per cent from the 17.5 per cent expected in the current fiscal.