No further fuel excise tax cut to help government meet fiscal deficit target: report

Deutsche Bank said India could meet its fiscal deficit target


The government could meet the 6.4 percent fiscal deficit target for 2022-23 if there are no excise tax cuts to reduce high oil prices and additional spending on subsidies, a German brokerage firm said Thursday.

Achieving the budgeted target will be possible if excise duties are not cut further, Deutsche Bank chief economist Kaushik Das said.

The note said that the recent reductions in excise duties, coupled with higher spending on fertilizer, food and fuel subsidies, have led to “upside risks” on the fiscal deficit target.

“… our analysis of fiscal accounting at this time indicates that the central government could still potentially keep the FY23 fiscal deficit close to the target of 6.4 percent of GDP, assuming no further excise tax cuts and / or additional spending on subsidies. “in addition to what has already been announced,” it said.

However, it will be a “different story” if crude oil prices rise to more than USD 150 per barrel over the course of the year, it said, suggesting that the fiscal deficit could otherwise extend beyond the targeted levels.

The broker said his view is that the fiscal deficit will come in at 6.5 percent of GDP.

Clarity on whether the fiscal target can be achieved or not, and if market lending needs to be increased from the current target of Rs 14.31 lakh crore, will only become clearer in the second half of the fiscal, when the government has sufficient data on revenue has. and spending front, it said.

Listing the factors leading to concerns about the fiscal situation, it said the government had reduced the central excise duty on petrol by Rs 8 per liter and diesel by Rs 6 per liter, and the expenditure on fertilizer subsidies was by Rs 1.1 lakh crore increased and a scheme of Rs 61 000 crore on cooking gas was also announced.

The note said the actual revenue collection appears to be higher than the revised estimates in FY22, which will make it easier to reach the revenue estimates for FY23 in absolute terms, but added that the actual expenditure also turned out to be higher than estimates .

In FY23, total revenue collections could be about Rs 24,500 crore lower, given the impact of the measures applied above, he said, adding that the spending constraint is likely to still be less than the additional increase in the subsidy account of Rs 2 lakh crore, which means we should expect an overall expenditure surplus of at least Rs 1.3 lakh crore, it reads.

(Except for the headline, this story has not been edited by techlives staff and is being published from a syndicated stream.)

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