No plan to change govt's FY23 borrowing target

No compromise on capex; consolidated fund to be used if needed: Source

The central government is sticking to its gross borrowing target of ~14.31 trillion for the current financial year (FY23) despite revenue hit on account of reduction in excise duty on petroleum products and higher subsidy burden owing to food and fertiliser, a top government source said on Wednesday.

There is no proposal as of now to revise the medium-term inflation target; that the government will pull out money from the Consolidated Fund of India to ensure that its capital expenditure commitments are met; and that the plan to privatise some state-owned banks is very much alive and could happen this year, the source said.

The person said talks were going on with Russia on trading through the rupee-ruble route, and that the planned rationalisation of goods and services tax (GST) rates might hit some speed bumps due to inflation overhang.

“Currently, we do not see the need to borrow additional sums from the markets. We are sticking to our FY23 borrowing plan,” the source said. When asked whether the FY23 fiscal deficit target of 6.4 per cent of gross domestic product (GDP) would be met, the source said the government would have to find a way to balance the books.

The Centre plans to borrow ~8.45 trillion from the bond markets in the first half (April-september) of FY23. This will be around 59 per cent of a lowered full-year gross borrowing target of ~14.31 trillion.

The revenue foregone due to the recent excise duty cuts on petrol and diesel will be around ~85,000 crore in FY23, and all of it will be borne by the Centre as the cut is on road & infrastructure cess. The Centre will bear an additional ~1.10 trillion in fertiliser subsidy as commodity prices have spiked due to Russia’s invasion of Ukraine.

Add to this, the government’s decision to extend the PM Garib Kalyan Anna Yojana (PMGKAY) till September, which will increase the food subsidy outlay for FY23 to ~2.87 trillion compared to the Budget estimate of ~2.07 trillion.

In spite of runaway consumer price index-based inflation (CPI), the source said there was no proposal to tweak the medium-term mandate of 4 (+/-2) per cent given to the Monetary Policy Committee.

Speaking on other issues, the source acknowledged that the current inflationary situation might lead to a delay in the planned rationalisation of GST rates as this could involve hiking the rates of some items. “Since 2019, the environment has not been conducive for rate rationalisation. In 2020 and 2021, there was the pandemic and now there is the war and its inflationary impact. Even if the group of ministers (headed by Karnataka CM) submits its report on rate rationalisation, the GST Council may not take it up till inflation overhang has eased a little bit,” the source said, and added that the next GST Council meeting would be held soon, before the Monsoon Session of Parliament.