Fiscal deficit target met despite new tax measures

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Fiscal deficit target met despite new tax measures

The government is confident that it is meeting its fiscal deficit target, after the recent measures taken by it including the imposition of a windfall tax on the export of fuels and an increase in the import duty on gold. It expects the revenue gain from these measures to offset the additional expenditure on account of subsidies and the revenue loss from excise duty cuts. The Centre's gross borrowing for fiscal 2023 is pegged at 14.95 lakh crore, due to changes on GST rates and health tax collection. Another official said the government was committed to the fiscal deficit target of 6.4% of gross domestic product for the current financial year. There were apprehensions that the Centre might not meet its fiscal deficit target due to excess subsidy payments. The government has budgeted 2.07 lakh crore for food subsidies in FY23, which is less than the revised 2.86 lakh crore for FY 22. The subsidy bill is expected to increase by about 2.87 lakh crore after the extension of the Pradhan Mantri Garib Kalyan Anna Yojana for six months to September. The fiscal deficit for April-May, the first two months of FY 23, was 2.03 lakh crore, or 12.3% of the target for the full financial year, due to higher expenditure, according to official data. The official acknowledged that the current account deficit could go up, but said India would come out of it with strong macroeconomic fundamentals and foreign exchange reserves. The current account deficit will go up if the oil prices are that high, the official said. The official added that India had been bridging the CAD with capital inflows for the last several years, but this year there is a headwind on capital flow. In the week ending June 24, India's foreign exchange reserves increased by $2.734 billion to $593.323 billion, the Reserve Bank of India said on Friday. People in the know said that the government is taking measures to deal with spiralling crude oil prices in the international market. India imports 85% of the crude it needs, and a weaker rupee has made the imports costlier.