It is unlikely that additional demand will arise for grants in the coming monsoon sessions.

It is possible that the government will not present a Supplemental demandThe upcoming monsoon session will include grants. This signals to departments and ministries the need for fiscal prudence in order to make better use of allocations and reduce the fiscal deficit. The emphasis is on prudent use of existing allocations. Budgetary resourcesET officials said that they will make a final decision in the next few minutes.

According to a ministry official who declined to be identified, “The goal is to get departments spending money with them in the most prudent way,” he said. “Financial management during difficult times is under stress.”

The complete review Situation fiscaleThe government will continue capital expenditures, even though this will be done in the second half of the current fiscal. Officials suggested that some non-priority spending could be rationalized.

In 2021-22, the government had presented a ₹1.87 lakh crore first supplementary demand for grants on July 20, proposing a net cash outlay of ₹23,675 crore. In the fiscal, the government exceeded the budgeted fiscal deficit target by about ₹80,000 crore. The target was raised to 6.9% GDP, from 6.8% in the budget. However, the actual figure came in at 6.7% GDP due to improved revenues.

The Centre faces fiscal pressures in the current year due to increased spending on fertilisers and food subsidies and loss of revenue from tax cuts to combat inflation.

According to official data, the fiscal deficit in April-May was Rs 2.03 crore crore. That’s 12.3% of 2022-23 budget projections. Higher expenditures accounted for the higher fiscal deficit. The fiscal deficit for April-May was 8.2% of its full-year estimate a year ago.

Fiscal deficit targets for 2022-23 are set at 6.4% GDP.

The finance ministry in its May monthly economic report warned that an increase on fiscal deficit could lead to a wider current account deficit.

The government’s ‘windfall taxes’ on domestic crude oil, as well as the export tax on petrol, diesel and aviation fuel, will raise revenues. However, the government wants to maintain control over spending, since any fiscal slippage will lead to an alarming current account deficit.

Additionally, RBIOfficials said that while the government is tightening its monetary policy to control inflation, it also needs to adopt a tighter fiscal strategy.

Last week’s report: Kotak Institutional EquitiesAfter taking into account the gains from fuel taxes, we have put the fiscal deficit at 6.5% GDP