FinMin moves first Supplementary Demands for Grants
The Centre has sought approval from the Parliament for fresh cash expenditure of around ₹3.25-lakh crore. This is the highest net cash outgo — combining two proposals — in the first batch of supplementary demand for grants (SDG). Experts see the move exerting some pressure on the fiscal deficit not as a share in GDP but in the absolute term.
“The first batch of SDG for 2022-23 includes 75 grants and six appropriations. The approval of Parliament is sought to authorise gross additional expenditure of ₹4,35,938.87 crore. Of this, the proposals involving net cash outgo aggregate to ₹3,25,756.69 crore and gross additional expenditure, matched by savings of the Ministries/Departments or by enhanced receipts/recoveries aggregates to ₹1,10,180.59 crore,” the proposal moved by the Finance Ministry on Friday said.
SDG refers to seeking approval from the Parliament for expenditure over and above what has been already accounted for in the Budget. This could be either fresh, more money in existing schemes or even a combination of both. Expenditure is met through net cash outgo or from savings out of the Budget provision.
Fertiliser, food subsidiy
Among the net cash outgo, a major chunk will be towards two subsidies — fertiliser and food. For fertilisers, over ₹23,000 crore has been provided towards P&K (phosphatic and potassic fertilisers) and over ₹86,000 crore has been marked for urea. An increase in fertiliser subsidy can be attributed to the Russia-Ukraine war due to which the cost of final fertiliser product and inputs went up while retail prices have not been revised. With the fresh cash outgo, the total subsidy bill has now touched over ₹2.15-lakh crore.
For food subsidy, SDG has proposed over ₹80,000 crore as additional expenditure. This includes over ₹60,000 crore towards the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), which provides free food grains to 80 crore people. The scheme has been extended till December 31, 2022, which is why the food subsidy bill has gone up to ₹2.86-lakh crore.
Experts, however, do not see any impact of the higher fresh cash outgo on the fiscal deficit. One reason is higher tax collections. While direct tax collections have recorded a growth of over 30 per cent during the April-November period, overall collections are likely to exceed by ₹2-2.5-lakh crore. The monthly average of GST collections is over ₹1.40-lakh crore during the fiscal and it is even expected to exceed the Budget estimate.
Devendra Kumar Pant, chief economist with India Ratings, said buoyancy in revenue collection will provide some cushion to the fiscal deficit while cash surplus will limit the government borrowing. “However, receipts from disinvestment and asset monetisation will be key to limiting the fiscal deficit to the budgeted 6.4 per cent of GDP.”
Rajani Sinha, chief economist with Care ratings, felt the overall SDG is broadly in line with expectations but the additional outgo on food subsidy is lower than expectations. The positive aspect to note is that apart from additional outgo on account of subsidy bills, there is an additional outgo for employment generation in the form of National Employment Guarantee Fund and capital asset creation under MGNREGA. There is also additional capital expenditure for roads and railways which is expected to boost capex and employment generation in rural areas.
“Taking into account the additional expenditure outgo and expectations of higher than budgeted tax revenue collection, we estimate the Centre’s fiscal deficit to exceed the Budget target by around ₹0.8-1-lakh crore in FY23,” she said.