The subsidy for urea has consumed three-fourths of the budget allocation in the first five months (April-August) of the current fiscal. This is 83 per cent higher than same period a year ago.

The overall expenditure is a little lower in the first five months compared with the corresponding period last fiscal. This has helped to limit the fiscal deficit to around 33 per cent of the budget estimate, data released by the Controller General of Accounts (CGA) showed. However, experts say there is upward risk to the budget target of fiscal deficit.

In this fiscal’s budget, the government allocated over ₹63,000 crore as urea subsidy and ₹42,000 crore for nutrient-based fertilisers. CGA data show the government spent around ₹47,310 crore on urea subsidy during the first five months of the current fiscal, 44 per cent of the budget allocation. Last year, during the same period, it paid over ₹25,769 crore which was 44 per cent of the budget allocation. The government has already doubled the fertiliser subsidy outgo for the current fiscal.

Over ₹13,600 crore were spent on nutrient-based fertilisers, 33 per cent of budget allocation and almost the same during the corresponding period last fiscal. Taking both into consideration, the overall fertiliser subsidy is now 57 per cent of the budget estimate.

Overall fiscal

Despite higher fertiliser subsidy, the overall expenditure during the April-August period was 35.2 per cent of the budget estimate against 36.7 per cent during the corresponding period of last fiscal.

The total expenditure contracted due to a 4 per cent fall in revenue expenditure whereas capital expenditure displayed a marginal rise of 1 per cent in August. Aditi Nayar, Chief Economist, ICRA, said: “While the year-on-year (yoy) growth remains high, capital spending has averaged around ₹50,000 crore per month, lower than the required monthly average of ₹62,500 crore to meet the 2022-23 budget estimate, with a slow pickup in the disbursals under the interest-free Capex loan for State governments.”

She also sees several upside risks to the fiscal deficit target of ₹16.6 lakh crore (6.4 per cent of GDP) for FY2023, emanating from the need for additional spending on food, fertilizer and LPG subsidies through the year, the revenue loss to the Centre on account of the excise duty etc. However, “a large part of this would be absorbed by higher-than-estimated non-excise taxes, savings on account of lower wheat procurement, as well as the windfall tax on domestic crude oil production and export duties on petroleum products, limiting the extent of the overshoot in the GoI’s fiscal deficit in 2022-23 relative to the budget estimates to around ₹1 lakh crore.,” she said.

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