How has the fiscal consolidation been mathematically achieved by Govt of India?
Fiscal deficit essentially shows the amount of money that the government borrows from the market. It does so to bridge the gap between its expenses and income.
Fiscal Responsibility and Budget Management Act of 2003 requires the Union government to contain its fiscal deficit to just 3% of the nominal GDP. However, barring 2007-08, India has never met this target.
In the current year, the government had set a target of 5.9% and revised estimates show it is likely to be even lower at 5.8%. Further, the FM has announced similarly ambitious targets for FY25 — at 5.1% of GDP— and FY26 — at 4.5% of GDP.
Now, the moot question is that how has the fiscal consolidation been achieved?
The total receipts are a tad lower than the budgeted estimates, but still the deficit is in check on account of lower Capital, Health and Education Expenditure as compared to the budgets.
The revised estimates show that this capex target was not met in the current year — it stands at Rs 9.5 lakh crore (budgeted capital expenditure was Rs 10 lakh crore).
The government was supposed to spend Rs 1,16,417 crore on education but spent Rs 1,08,878 crore.
Similarly on health, it had budgeted an expenditure for Rs 88,956 crore but spent Rs 79,221 crore.
Note: The capital expenditure, though lower than the budgeted expenditure, was more than double of Rs 4.39 Lakh crore in FY 20-21, which by itself is an impressive jump.
