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NEW DELHI : The Union government in a statement to Parliament on Tuesday highlighted the need for flexibilities in expenditure amid external shocks and global uncertainties to achieve the fiscal glide path.

However, with tax revenues significantly higher than the five year’s moving average and a historic push to capital expenditure and rationalization of revenue expenditure, it said that the Centre remains committed towards strong macroeconomic fundamentals and financial stability.

“…Effective management of the exogenous shocks and global uncertainties requires the additional flexibilities in terms of expenditure management and fiscal consolidation keeping the government’s intent to reach the fiscal deficit of 4.5% of GDP by FY 2025-26 as announced in the Budget 2021-22 through a glide path," said the statement by the ministry of finance. The statement was part of the requirement under the Fiscal Responsibility and Budget Management (FRBM) Act.

India’s fiscal deficit shot up to a record 9.3% in 2020-21 from 4.6% in the previous year due to the pandemic shock.

Explaining the reasons for not being able to table its rationale of deviating from the fiscal deficit glide path in Parliament during the pandemic, it said that the three continuous covid-19 waves, ongoing Russia-Ukraine conflict, and global economic uncertainties have affected almost all macroeconomic indicators, making synchronization between the budget and medium-term goals difficult.

“In the current financial year, the expenditures to stabilize the economic growth and also catering the needs of marginally weaker sections of the country amid the external economic shocks have pushed the expenditure upward. Therefore, any projections amidst global turbulence, having consequence on all major economies, may bring risk of considerable gap between projected numbers and actuals therein," it said.

The government last week sought an additional 3.25 trillion as supplementary demands for grants for 2022-23, primarily to fund a higher subsidy bill on items such as fertilizers, food and LPG, and to further ramp up capital expenditure in sectors like roads and railways this year.

ABOUT THE AUTHOR

Dilasha Seth

" Dilasha Seth is a journalist reporting on macroeconomic policy for the last 11 years. She writes extensively on issues including international trade, macroeconomic data, fiscal policy, and taxation. At Mint, she reports on trade deals that India is signing besides key policy decisions of the Ministry of Finance. She closely tracked and covered the transition to the goods and services tax (GST) regime in 2017 and also writes on direct tax-related issues. In the past, she has worked with Business Standard and The Economic Times. She is based in Bangalore."
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