Fear of increase in fiscal deficit due to higher expenditure on MNREGA and subsidies

Domestic rating agency India Ratings and Research on Tuesday said that despite good growth in tax collections in the current financial year, the fiscal deficit may increase due to increased expenditure on employment guarantee schemes and subsidies. The rating agency said that the fiscal deficit in the financial year 2023-24 may be six per cent, slightly more than the set target.

In the budget, the fiscal deficit was estimated to be 5.9 per cent of the gross domestic product (GDP). "The fiscal deficit will widen due to expenditure exceeding budgeted revenues through the first Supplementary Demand for Grants and possibly also the second supplementary demand for Grants and GDP at current market prices falling below the budget estimate," India Ratings said.

According to this, the fiscal deficit will increase despite higher tax and non-tax revenue collection. Apart from this, it will also be affected if the income from disinvestment is less than the budget estimate. In the first supplementary demand for grants, the central government will spend more on priority sectors like the Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGA) besides food, fertilizer and LPG subsidies.

Because of this, the fiscal deficit may exceed the target. Rs 60,000 crore was allocated under MNREGA in the budget for the current financial year but till December 19, Rs 79,770 crore has already been spent. For this, an additional provision of Rs 14,520 crore has been made in the first demand for supplementary grants.