Fiscal deficit for the next financial year could be in the lower end of 6-6.5 per cent, State Bank of India’s Economic Research Department said in a report authored by Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser at the country's largest lender.
"The budget should also allow for very gradual fiscal consolidation. For FY23, the fiscal consolidation should remain limited to 30-40 bps from the current fiscal. Assuming that the Government keeps the expenditure growth at 8 per cent over FY22 estimates at Rs 38 lakh crore in FY23 and receipts (minus borrowing and other liabilities) would grow by 10.8 per cent, it would lead to fiscal deficit of around Rs 16.5 lakh crore or 6.3 per cent of GDP in FY23," SBI said in a report.
Meanwhile, SBI has pegged that gross borrowings for the next financial year could be Rs 12 lakh crore and if the LIC share sale via initial public offering (IPO) goes through successfully in the current fiscal the government could end the financial year with large cash balance of Rs 3 lakh crore which can support large part of fiscal deficit without taking recourse to market borrowing. However, SBI cautioned that any new tax in form of Wealth Tax or others could do more harm than benefit to the government.
"We believe net market borrowing of the Centre will be around Rs 8.2 lakh crore and with repayments of Rs 3.8 lakh crore, gross borrowing are expected at Rs 12 lakh crore (73 per cent of the FD). Interestingly, in FY22, RBI has done OMOs of around Rs 2.6 lakh crore that did support a large Government borrowing programme without disruptions. In FY23, sans the support of such OMOs, but with Rs 1.5 lakh crore expected through inclusion in bond index and credit off take also picking up recently, there will still be northward pressure on bond yields," SBI said.