Growth Over Deficit: Govt Shields Rs 12.22 Lakh Cr Capex Amid War Stress
Govt prioritises growth spending as oil shock, tax cuts and deficit pressures weigh on finances
New Delhi: Despite the fiscal stress caused by the ongoing West Asia conflict, the Centre will proceed with the planned Rs 12.22 lakh-crore capital expenditure or capex in the current fiscal to maintain the growth momentum, a senior official said on Friday.
“The upcoming few quarters and the coming year would possibly have a lot of stress points. Tax buoyancy could be impacted by a cut in excise duties on petrol and diesel brought about in late March. The fiscal stress is indeed very much a reality, but at the same time, the capex would really be a priority item, which we would like to preserve and ensure that it continues at the budgeted level, expenditure secretary V Vualnam said in an event here.
The secretary further said that highways, railways, shipping, ports, and urban development sectors would be the focus areas for FY27 capex. “The current global uncertainties have thrown a very challenging situation for India with the country being a net importer of petroleum products, he said the government has been proactive in trying to tackle each situation with agility,” he said, adding that India’s fiscal prudence has put the country on a very good stead in the current unpredictable times.
The FY27 Budget has pegged the fiscal deficit at 4.3 percent of GDP, which is now seen at 4.5 per cent of GDP, following a downward revision in India's nominal GDP under the new series. “We will, on our part, be committed to see that the required funds are provided in spite of all the stress points that may come up,” the secretary said.
To contain retail prices of petrol and diesel from rising amid the ongoing West Asia war, the government has cut excise duties, which poses a risk of fiscal slippage. The excise duty cut is estimated to cost Rs 7,000 crore to the exchequer for a Period of 15 days. Since the beginning of the war in West Asia on February 28, crude oil prices have soared to a four-year high of $126 per barrel on Thursday from about the $73 level before the war.
“The next few months, the next quarter and the coming year are indeed very difficult to envisage, lots of possible stress points. Tax buoyancy will also have been looked out for amidst these conditions,” Vualnam said, adding that it can further squeeze fiscal space.
