Union Budget 2023: FM targets 5.9% fiscal deficit for FY24

The nation experienced shockwaves during the 2021 Union Budget, when the absolute fiscal deficit of the nation was reported at Rs.18.2 trillion, which was a staggering 9.2% of the nominal GDP. There was pressure piling on the Ministry of Finance to somehow attenuate the impact of the deficit. With slow and steady steps, FY22 reported a much more relieving deficit percentage of 6.7% and based on the consolidatory achievement of the 6.4% target for FY23, the ministry has postulated the deficit to fall even further to 5.9% of GDP in FY24.

Nirmala Sitharaman further iterated that the intention to bring fiscal deficit below 4.5% yet remains pertinent. Moving on, the total expenditure for the coming fiscal year is planned at Rs45 trillion, which is a Rs4 trillion increase from the revised estimates for FY23. The total expenditure and receipts other than borrowing are postulated to come at Rs.45 trillion and Rs.27.2 trillion respectively; net tax receipts will likely be Rs.23.3 trillion.

The lower fiscal deficit target expectation for FY24 is backed by a potential change in global commodity prices as well as a withdrawal of COVID-related subsidies in light of strong post-pandemic recovery. Many believe that the windfall gains tax (SAED) and additional tax revenue from GST will also provide relief to the huge debt predicament. States have been permitted a fiscal deficit which stands at 3.5% of their respective Gross State Domestic Product (GSDP), with 0.5% of this share being separately allotted for power sector reforms.