Is FY22 Fiscal Deficit target of 6.8% realistic?

~keshav

The latest budget for FY 22 which was released by the Ministry of Finance has brought an array of hopes for the people of India when honourable Mrs. Nirmala Sitharam declared the Fiscal Deficit target at 6.8% for this year. Despite the fact that the Indian government couldn't do much to achieve the last year's target, which was set at 3.5% due to the pandemic situation , the trust and hopes are still alive for the policies and strategies adopted.

'Excessive spending on the Healthcare and settling down the crisis of migrant labour resulted in a very wide margin between expected and planned Fiscal Deficit for FY 21' said one top Minister from the Modi Government. However, this year with certain amendments in Fiscal Responsibility and Budget Management Act 2003 and the increased burden in taxes will hopefully lower down the gap. Disinvestment by monetising the assets of government sector will also bring in the required amount in future which would further escalate the process to increase the revenue. Not only this but the government has also promised to reduce the figure till 4.5% by FY'26. As per the report which was released by the State, it further ordered to put ceiling on net borrowings by State Governments to 4% of of their GDP. Also, the money borrowed is being spent on several projects which includes major chunk of capital expenditure and is expected to bring revenue in next three to four years.

However, there are pretty downfalls to this too and the government has to keep certain things in mind before actually implementing it. Firstly, the second wave of Covid-19 which has already resulted in Night Curfews and temporary lockdowns in certain states and may bring in some barriers in the development process. Secondly, the debt of Indian government has been rising at a very rapid rate which is currently around 70-80% of the GDP. Also, it will be foolish to ignore all the uncertainties which may arise in the future but the government has already started preparing by increasing the contigent liability fund at a substantial rate. The year can be very challenging for all of us with sudden rise in covid infections but with government's proper implementation and its fulfillment of all the promises, the target can be achieved.

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