Spending by the Central government in this financial year could be less than budgeted for the first time in three years, two sources with direct knowledge of the matter told the Reuters on Wednesday. The expected savings come amid the government’s push to meet a fiscal deficit target of 6.4 per cent of the Gross Domestic Product (GDP). 

Total expenditure for 2022-23 that started on April 1 could come in Rs 70,000 crore to Rs 80,000 crore below the budgeted Rs 39,45,000 crore, the sources said, requesting anonymity. 

The government is keen to rein in the fiscal deficit as it is well above the historical levels of between 4 and 5 per cent, having shot up to a record of 9.3 per cent during the first year of COVID-19 pandemic in 2020-21. 

Though tax cuts on fuel, aimed at reducing the impact of soaring global energy prices, could reduce revenues by more than Rs 1,00,000 crore, one of the sources said that total revenues were still expected to increase by over Rs 1,50,000-2,00,000 crore this year. 

The rise in revenues would still not be enough to cover anticipated additional expenses with, for example, the government potentially having to provide additional food and fertiliser subsidies of Rs 1,50,000 crore to Rs 1,80,000 crore, according to the sources. 

Despite those pressures, the government remains intent on achieving its deficit target, according to one of the sources. 

“The government is not going to budge from the fiscal deficit target,” the source said, noting that an “expenditure rationalisation” would be required. 

The sources did not say which sectors were likely to be affected by expenditure cuts as discussions over revised Budget estimates were going on and a final call would be taken by the end of December. 

The Finance Ministry declined to comment. 

Economists at brokerages such as Citi, Kotak and ICRA see a risk to the 6.4 per cent deficit target. 

Without any expenditure cuts, Kotak expects a fiscal deficit of 6.6 per cent, while ICRA expects the government to overshoot the deficit target of Rs 16,61,000 crore by Rs 1,00,000 crore.