Finance Minister Nirmala Sitharaman in the Union Budget has projected an ambitious revenue deficit target of 2.9 per cent for the next financial year compared to the revised estimate of 4.1 per cent in 2022-23.

Notably, the budget estimate for revenue deficit for this financial year was at 3.8 per cent. Despite a healthy growth in tax receipts, the slip is primarily due to the surge in global risks driven by the Russia-Ukraine war leading to higher spends on food and fertiliser subsidies.

The revenue deficit for 2021-22 stood at 4.4 per cent.

“The worry is the revenue deficit target. It is already a slip this year when compared with the budget estimates. The target for the next financial year is steep and it has to be monitored carefully,” economist and analyst, Nirupama Soundararajan told India Narrative. Revenue deficit is the difference between total revenue expenditure and the revenue receipts which includes tax and non tax revenue. Soundararajan added that revenue deficit at 4.1 per cent is only a tad lower than the 2021-22 figure.

For 2023-24, the gross tax revenue is estimated to grow at 10.4 per cent over the current financial year. While direct tax is projected to increase 10.5 per cent, indirect tax growth is pegged at 10.4 per cent.

The Budget, the last full Budget of the Narendra Modi government before general elections next year, has slashed outlay for subsidies of food, fertiliser and petroleum to Rs 3.74 lakh crore from the revised Rs 5.21 lakh crore in 2022-23.

Amid the geopolitical risks, India’s fiscal deficit for the ongoing financial year is expected to be 6.4 per cent of GDP – in line with the Budget estimate. Adhering to the fiscal consolidation plan, Sitharaman has pegged the fiscal deficit for the next financial year to be 5.9 per cent of GDP and 4.5 per cent by 2025-26.