Govt. may still meet fiscal deficit target: SBI

Representational image of sale of tomatoes at a vegetable market in Erode

Representational image of sale of tomatoes at a vegetable market in Erode | Photo Credit: RAMAKRISHNA G

India’s retail inflation may ease slightly to 7% in May, from the close to eight-year high of 7.8% in April, said State Bank of India economists, who reckoned that the Centre could still meet its fiscal deficit target of 6.4% of GDP for this year thanks to conservative revenue estimates in the Union Budget.

While the full impact of the recent measures to curb runaway inflation, including the excise duty cuts on fuel products and import-export duty tweaks for steel and plastic, will be visible only in later months, the economists said in a research report that the steps could decelerate the pace of price rise by about 35 to 40 basis points. One hundred basis points equal one percentage point.

“Under current circumstances, consumer price inflation is expected to average at 6.5%-6.7% in 2022-23. Additionally, these measures are likely to have fiscal implication for the Centre as well [but] considering the conservative budgetary estimates, the net fiscal implication could be around ₹66,000 crore ,” SBI group chief economic adviser Soumya Kanti Ghosh noted in the report.

The government has increased its fertilizer subsidy bill by ₹1.1 lakh crore and announced a ₹200 subsidy per gas cylinder for up to 12 cylinders to about 9 crore beneficiaries of the PM Ujjwala Yojna. Import duties on large quantities of edible oil imports have also been waived.

“These measures in total will have fiscal implication of around ₹2.5 lakh crore. However, the revenue collection for 2022-23 is expected to be higher than estimates in the Budget as they were on the conservative side,” they concluded.

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Printable version | May 30, 2022 7:54:00 pm |