India Ratings and Research (Ind-Ra) forecasts a rise in fiscal deficit to 6 per cent of GDP in FY24 due to higher-than-budgeted spending on subsidies and rural employment schemes, coupled with lower-than-anticipated nominal GDP growth. The nominal GDP projection of 10.8 per cent in the budget is challenged by an expected growth range of 9-9.5 per cent per cent per cent, with H1 at 8.6 per cent. The agency anticipates unlikely second-half expansion, necessitating additional grants and pushing revenue expenditure to Rs 37.1 trillion, a Rs 2.0 trillion overshoot from the budget.
The increased spending is attributed to specific ministries and the replenishment of Rs 28,140 crore to the Contingency Fund. With the first batch of supplementary demand, the Centre's total outlay rose to Rs 45.6 trillion, affecting both revenue and capital expenditures.
The additional allocation of Rs 58,378 crore focuses on food, fertiliser, LPG subsidies, and the MGNREGA. Although net tax revenue is expected to surpass estimates, the second batch of demand may counter its impact, contributing to fiscal deviation.
Despite achieving 45 per cent of the fiscal deficit target in April-October, lower expenditure in October led to a slower pace compared to FY23. Economists differ in their views, with some optimistic about meeting the fiscal deficit target while others suggest possible offsets through savings in other areas.
Gaura Sen Gupta, an economist at IDFC FIRST Bank, pointed to moderate overspending on subsidies and MGNREGA, suggesting a balance through potential expenditure savings, particularly in loans to state governments for capital expenditure.