{"id":222053,"date":"2023-01-11T20:55:33","date_gmt":"2023-01-11T15:25:33","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=222053"},"modified":"2023-01-11T20:55:33","modified_gmt":"2023-01-11T15:25:33","slug":"conservative-budgeting-fiscal-space-should-be-used-carefully","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/conservative-budgeting-fiscal-space-should-be-used-carefully\/","title":{"rendered":"Conservative budgeting \u2013 Fiscal space should be used carefully"},"content":{"rendered":"\n

Source<\/strong>: The post is based on an article\u00a0\u201cConservative budgeting \u2013 Fiscal space should be used carefully<\/strong>\u201d <\/strong>published in Business Standard<\/strong>\u00a0on\u00a011th<\/sup> January 2023<\/strong>.<\/p>\n

Syllabus: GS 3 \u2013 <\/strong>Indian Economy<\/strong><\/p>\n

Relevance: <\/strong>ways to use additional fiscal resources<\/strong><\/h5>\n

News<\/strong>: The Union government is confident of achieving the fiscal deficit target of 6.4 per cent of gross domestic product (GDP) in the current fiscal year.<\/p>\n

What has led the government in achieving the fiscal deficit target?<\/strong><\/h5>\n

It is because of conservative budgeting at multiple levels<\/strong>. For example<\/strong>, the government budgeted for 9.6 percent growth in its tax revenue over the revised estimates for 2021-22.<\/p>\n

However, the revised estimates calculated have grown by more than 23 per cent over the previous year.<\/p>\n

Further, the government also assumed in nominal terms the Indian economy would grow by just about 11.1 per cent in the current fiscal year.<\/p>\n

But, the first advance estimates for national income, released last week, show the economy is expected to grow by 15.4 percent this fiscal year.<\/p>\n

This expansion in the economy gives the government additional space to spend while maintaining the required fiscal deficit as percentage of GDP leading to higher growth and tax collection.<\/p>\n

However, underestimating growth and revenue collection can have an effect on overall expenditure efficiency but it is also a viable option.<\/p>\n

How underestimating growth and revenue is beneficial?<\/strong><\/h5>\n

Government has often struggled in the past to meet the fiscal-deficit target and ended up either reducing capital expenditure or shifting revenue expenditure outside the Budget.\u00a0<\/strong><\/p>\n

However, adopting such measures in the present situation where both the debt-GDP ratio and fiscal deficit are at higher levels could create risks.<\/p>\n

Further, it is also hard to anticipate both expenditure and revenue collection with precision at the time of presenting the Budget. Therefore, it is sensible for the government to adopt a conservative approach in Budget making.<\/p>\n

Moreover, the government can also adopt a few measures when it has more fiscal space available in the year.<\/p>\n

What measures can be adopted by the government when it has more fiscal space?<\/strong><\/h5>\n
    \n
  1. a)<\/strong> reduce the deficit and aim to reach the stated medium-term fiscal targets as early as possible, b)<\/strong> deploy additional resources in building physical and social infrastructure, c)<\/strong> spend more on education and health, d)<\/strong> spend additional resources on defence.<\/li>\n<\/ol>\n

    However, to utilize its additional fiscal resources, the government needs to have a clear and transparent medium-term fiscal consolidation roadmap, else it may end up using additional fiscal space without any longer-term benefit.<\/p>\n

     <\/p>\n","protected":false},"excerpt":{"rendered":"

    Source: The post is based on an article\u00a0\u201cConservative budgeting \u2013 Fiscal space should be used carefully\u201d published in Business Standard\u00a0on\u00a011th January 2023. Syllabus: GS 3 \u2013 Indian Economy Relevance: ways to use additional fiscal resources News: The Union government is confident of achieving the fiscal deficit target of 6.4 per cent of gross domestic product… Continue reading Conservative budgeting \u2013 Fiscal space should be used carefully<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[10503,216],"class_list":["post-222053","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-business-standard","tag-gs-paper-3","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/222053","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=222053"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/222053\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=222053"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=222053"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=222053"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}