'Enough fiscal cushion to deal with external shocks'

Some fiscal space has been built into the Budget FY24, to deal with higher spending requirements from external shocks, like higher outlay than budgeted for fertiliser subsidy, according to finance secretary TV Somanathan. Gross tax receipts could grow at 11%, against 10.5% budgeted, and there could be savings of about ₹50,000 crore in the 10 trillion capex budget. The government will also continue with the windfall taxes fuel products to deal with unfavourable fiscal conditions if crude prices surge, he told Prasanta Sahu in an interview.

The threat to the Centre's finances in FY24 could come from a potential spike in subsidies and higher interest costs. How do you plan to deal with it? 

As far as fertiliser subsides are concerned, what we have provided (1.75 trillion) is more than adequate. Subsidy requirement will likely be less because though prices have fallen by more than 20%, but we have reduced allocations only by 20%. We have not taken the current import price, we have taken an average price over a period. So, it gives us some space in case there is an increase in fertiliser prices. There is not much risk there. On petroleum, the range of crude prices will remain roughly the same as this year and there will be no further loss of revenue (from any potential adjustment in excise duty). The reduction in fiscal deficit next year 50 bps - equivalent to the estimated fall in subsidies. Other items of revenue spending hasn't been controlled in the aggregate.

It is a balance between the need to support growth in a year when global growth may be slowing down. We felt an increased impetus is required domestically to compensate for the (diverse) external factors. Therefore, fiscal consolidation has been moderated to 0.5% instead of 0.7%, which it should have been if we were to go on a trajectory (to reduce fiscal deficit to below 4.5% by FY26). A slight backloading is there. But, we feel, the increased economic growth that would result from higher spending will help us to consolidate in future because the expansion of GDP is one of the best ways of consolidation.