Finance secretary TV Somanathan said that the government will not cut capital expenditure in the current fiscal year because of suggestions by experts that fiscal policy should help monetary policy in managing inflation. He said that capital investment is needed for the long-term growth of the economy and short-term developments should not distract from that goal. The government has budgeted 7.5 lakh crore capital expenditure in FY 23 compared to a revised 6.03 lakh crore capex in FY 22. Somanathan said we will continue with the committed capex. In a surprise move, the Reserve Bank of India RBI raised the repo rate by 0.4 percentage point to 4.4% earlier this month to tame runaway inflation that hit an eight-year high of 7.79% in April. The fiscal deficit may exceed the target in FY 23 because of the Ukraine conflict and food and fertiliser subsidies likely to be higher due to the fact that the Centre has a fiscal deficit of 6.8% of GDP. We will hurt the long-term growth if we curtail capex in view of the short-term issues. Somanathan said that there will be no budgetary constraints on capital spending and that it will affect committed projects in multiple sectors such as roads, railways and roads. While capex may not be cut, fiscal policy will in general support the RBI in managing inflation, according to other sources in the government. There could be a redeployment of some revenue expenditure, which will ensure that spending does not rise sharply and undermines the RBI's monetary policy, said one official, ruling out any sharp expenditure cuts as previously done as revenues were comfortable. The official said it was not a dire situation. There could be a cut in revenue expenditure but not with the same intensity. There is a debate among policy makers about fuel tax cuts, officials said. They may cool retail prices in the short run, but increase demand elsewhere, swell borrowing and run counter to the RBI's efforts to push down demand and cool inflation with monetary tightening. After considering all views at the highest level, a final decision will be made on any tax cut. The central bank seems to favor a reduction in taxes on fuels. There is a chance that central and state taxes will surpass any rise in subsidy costs because of the Ukraine crisis, giving them space to cut taxes on fuels. The monetary policy committee of the RBI noted in the minutes of the last review released on Wednesday that countercyclical fuel taxes are necessary to prevent a ratchet effect on inflation.