Increased MNREGA and subsidy expenditure might result in some budgetary slippage in FY2024, according to India Ratings

  Increased MNREGA and subsidy expenditure might result in some budgetary slippage in FY2024, according to India Ratings

Increased MNREGA and subsidy expenditure might result in some budgetary slippage in FY2024, according to India Ratings

It said that even with increased tax and non-tax revenue collections, there would still be budgetary slippages and that they would more than make up for lesser disinvestment revenues than projected in the budget.

It said that since the projected fund was almost depleted by the end of October 2023, the federal government has enhanced the fertilizer subsidy to Rs 57,360 crore from the originally planned nutrient-based fertilizer subsidy of Rs 44,000 crore.

A domestic rating agency said on Tuesday that there is a chance of fiscal slippage in FY2024 because of increased expenditure on subsidies and the job guarantee program, despite robust growth in tax receipts. According to India Ratings & Research, a division of global rating company Fitch Ratings, the fiscal deficit for FY2024 is expected to be 6%, as opposed to the budgeted 5.9%.

"The above-budget revenues and expenditures due to first and likely second supplementary desire for grants in combination with below-budget actual gross domestic product will widen the fiscal deficit," the agency said in a note. It said that even with increased tax and non-tax revenue collections, there would still be budgetary slippages and that they would more than make up for lesser disinvestment revenues than projected in the budget.

Details of the additional spending are included in the first supplemental demand, which states that the federal government would spend more on key sectors/sectors such food, fertilizer, and LPG subsidies as well as the Mahatma Gandhi National Rural Employment Guarantee Scheme. It said that since the projected fund was almost depleted by the end of October 2023, the federal government has enhanced the fertilizer subsidy to Rs 57,360 crore from the originally planned nutrient-based fertilizer subsidy of Rs 44,000 crore.

Under the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA), correspondingly, a sum of Rs 79,770 crore has already been invested till December 19, 2023, in recognition of the ongoing need for employment; an additional Rs 60,000 crore has been granted in the Budget. The whole sum has already been used. It said that the first supplemental demand for grants had allotted Rs 14,520 crore.

The agency said that because of the broadening of the tax base, improved enforcement of compliance, and use of technology in the tax collecting process, it anticipates that the rise in tax revenue collection would surpass the budgeted projection of 11.7% in FY2024. Approximately 60% of the budgeted cash for the April–October period was spent.

With a growth rate of 17.2% and a tax/GDP ratio of 8.81 percent compared to the budget of 7.72 percent, we anticipate it to reach Rs 24.5 lakh crore in FY2014, as opposed to the budget of Rs 23.3 lakh crore. Devendra Pant, chief economist and head of public finance, said. However, the agency said that the government is having difficulty with this, with capital revenues from April to October 2023 totaling less than Rs 22,990 crore, or only 27.4% of the amount anticipated for FY24. Despite having a low budget of Rs 51,000 crore, the government has generated just Rs 8,000 crore until October in order to meet the disinvestment objective this year as well.

Regarding spending, the agency said that the first supplemental demand for grants would contain extra funding of Rs 58,380 crore. This will cause revenue expenditure to increase at a rate of 2.8% instead of the 1.2% objective set by the budget. The agency said that it anticipates the government would make a second supplemental grant request, which would cause revenue spending to increase to Rs 37.1 lakh crore in FY2024—a sum that is Rs 2.0 lakh crore more than anticipated.

"The increase in expenditure has been primarily due to higher expenditure by some select ministries/departments as well as recovery of Rs 28,140 crore in the contingency account of India, which was drawn in anticipation by 30 departments/ministries in the past," stated the statement.