India faces near term challenges in managing its fiscal deficit: Finance Ministry
Reiterating India's stance, the Ministry of Finance in its monthly economic report said that India is at low risk of stagflation, owing to its prudent stabilisation policies.
- Jun 20, 2022,
- Updated Jun 20, 2022 8:25 PM IST
The Finance Ministry in its latest monthly economic report said that India faces near term challenges in managing its fiscal deficit due to various global challenges. It added that there is now an upside risk to gross budget deficit due to additional welfare and subsidy spending and cut in excise duty on fuel.
"As government revenues take a hit following cuts in excise duties on diesel, and petrol, an upside risk to the budgeted level of gross fiscal deficit has emerged. Increase in fiscal deficit may cause the current account deficit to widen, compounding the effect of costlier imports, and weaken the value of the rupee,” the Finance Ministry said.
Reiterating India's stance, the Ministry of Finance in its monthly economic report said that India is at low risk of stagflation, owing to its prudent stabilisation policies. "The momentum of economic activities sustained in the first two months of the current financial year augurs well for India continuing to be the quickest growing economy among major countries in 2022-2023,” it said.
With regards to the surging prices of oil globally, the report said that the imported components of high retail inflation in India have mainly been elevated global prices of crude and edible oil, it said, adding the onset of the summer heat wave has also contributed to the rise in food prices domestically.
However, going forward, it said, international crude prices may be tempered as global growth weakens and the Organisation of Petroleum Exporting Countries (OPEC) increases supply.
The report states that the Indian economy in 2021-22 has indeed fully recovered the pre-pandemic real GDP level of 2019-20, it said the real GDP growth in 2021-22 stands at 8.7 per cent, 1.5 per cent higher than the real GDP of 2019-20
“The provisional estimates of GDP released on 31st May 2022 have reaffirmed Indian economy’s complete recovery over the pre-pandemic level, although contact intensive sectors are yet to recover. The recovery is driven by sustained growth in agriculture, higher investment and rise in exports,” the report said.
The Finance Ministry in its latest monthly economic report said that India faces near term challenges in managing its fiscal deficit due to various global challenges. It added that there is now an upside risk to gross budget deficit due to additional welfare and subsidy spending and cut in excise duty on fuel.
"As government revenues take a hit following cuts in excise duties on diesel, and petrol, an upside risk to the budgeted level of gross fiscal deficit has emerged. Increase in fiscal deficit may cause the current account deficit to widen, compounding the effect of costlier imports, and weaken the value of the rupee,” the Finance Ministry said.
Reiterating India's stance, the Ministry of Finance in its monthly economic report said that India is at low risk of stagflation, owing to its prudent stabilisation policies. "The momentum of economic activities sustained in the first two months of the current financial year augurs well for India continuing to be the quickest growing economy among major countries in 2022-2023,” it said.
With regards to the surging prices of oil globally, the report said that the imported components of high retail inflation in India have mainly been elevated global prices of crude and edible oil, it said, adding the onset of the summer heat wave has also contributed to the rise in food prices domestically.
However, going forward, it said, international crude prices may be tempered as global growth weakens and the Organisation of Petroleum Exporting Countries (OPEC) increases supply.
The report states that the Indian economy in 2021-22 has indeed fully recovered the pre-pandemic real GDP level of 2019-20, it said the real GDP growth in 2021-22 stands at 8.7 per cent, 1.5 per cent higher than the real GDP of 2019-20
“The provisional estimates of GDP released on 31st May 2022 have reaffirmed Indian economy’s complete recovery over the pre-pandemic level, although contact intensive sectors are yet to recover. The recovery is driven by sustained growth in agriculture, higher investment and rise in exports,” the report said.