Rating agency ICRA has said that missing the divestment target could increase the budget deficit in 2021-22
Bombay:
If the divestment target is not met, the government’s fiscal deficit could reach 16.6 lakh crore or 7.1 percent of GDP in the current fiscal year, the ICRA rating agency said in a report.
With state governments’ budget deficits estimated at a relatively modest 3.3 percent of GDP in 2021-22, the government deficit is estimated to be around 10.4 percent of GDP, the agency said in a report.
In the base case for 2022-23, the agency sees the government budget deficit moderate to Rs 15.2 lakh crore or 5.8 percent of GDP.
While the planned cessation of GST compensation could push the state governments’ budget deficit to the 3.5 percent of GDP cap set by the Fifteenth Financial Commission, the government deficit will still fall to 9.3 percent of GDP in 2022 -23, it said.
ICRA chief economist Aditi Nayar said that with a noticeable growth in tax revenues, the government’s gross tax receipts are expected to exceed budgeted amount by a healthy Rs 2.5 lakh crore in FY2022.
However, the net tax revenue gain for the government will be offset by the expected large lost revenue from disposals and delinquencies, especially for those items that were included in the Second Supplementary Demand for Subsidies, such as food and fertilizer subsidies, equity injection in Air India Assets Holding Limited, etc., she said.
“Therefore, we expect the government budget deficit to reach Rs 16.6 lakh crore in FY2022, exceeding the budgeted amount of Rs 15.1 lakh crore,” Ms Nayar added.
Ms Nayar added that the union budget for 2022-23 will face some constraints due to an expected slowdown in indirect tax growth due to the recently granted excise tax relief and the moderation in nominal GDP growth to around 12.5 percent of the 17.5 percent. cents expected in the current fiscal.
