Preparations for Budget, 2023-24 are to get into final gear from Monday onward with an inter-ministerial meeting to finalise revised estimate of expenditure for Fiscal Year 2022-23 and to discuss the first draft of budget estimate for the next fiscal.

Although the date for the Budget announcement has not been declared, it is expected to be presented on February 01, 2023.

First stage

The first stage of budget-making exercise will include series of meetings, spread over a month (October 10 – November 11) to discuss 102 demands for grants related with 54 Central Ministries and Departments. Normally revised estimate is derived on the basis of expenditure during the first six months of fiscal (April-September), while first draft of budget estimate for next fiscal is discussed on the basis of expenditure during the first nine months of the previous fiscal. However, top Government officials said, these do not stem from any law or rules but convention and can be changed according to circumstances.

According to data from Controller General of Accounts, various Central Ministries and Departments have spent over ₹13.90 lakh crore during April-August period of FY 2022-23 which is 35.2 per cent of the budget estimate. It is higher in the absolute term but less in percentage term. During April-October period of FY 2021-22, these Ministries and Departments spent over ₹12.76 lakh crore which is around 36.7 per cent of the budget estimate.

Challenges this year

This year, budget-making is challenging on many fronts. First, prices of fertilisers are very high and the Government has almost doubled the subsidy payout as compared to the budget, to ₹2.15 lakh crore. At the same time, extension of free food programs for another three months will result in additional spending of over ₹43,000 crore. There is no clarity on Russia-Ukraine war which will have an impact not just on fuel but also on edible oil prices.

However, officials feel buoyant tax collections, both in direct and indirect taxes, will provide some room for manoeuvrability. Also, implementation of Treasury Single Account (TSA) and Single Nodal Agency/Account (SNA) along with other measures are expected to help the Government to save over ₹80,000 crore. These mechanisms ensure release of further fund, only when previous released is actually spent. One indication of saving was indicated when Finance Ministry decided to cut overall borrowing by ₹10,000 crore for entire fiscal while finalising the borrowing calendar for October-March period of current fiscal.

Experts are divided over the fiscal situation.

Aditi Nayar, Chief Economist with ICRA said there are several upside risks to the fiscal deficit target of ₹16.6 lakh crore and estimate the deficit to be overshoot by ₹1 lakh crore on account of additional spending on food, fertiliser and LPG subsidies through the year, the revenue loss to the Centre on account of the excise duty etc. However, Sunil Kumar Sinha (Principal Economist) and Paras Jasrai (Analyst) of India Rating, in a note, expected that final revenue outcome will be better than the budget proposals due to low revenue buoyancy assumed in the budget and pessimistic nominal GDP growth assumption which is likely to help the Government to achieve the fiscal deficit estimate.

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