The government remains committed to its ₹12.22 lakh crore capital expenditure in the current fiscal despite fiscal stress arising from global uncertainties, according to Moneycontrol.com. Expenditure Secretary Meghna Mittal emphasized at the ICPP Growth Conference organised by Ashoka University that while the upcoming months, next quarter and year ahead would be very difficult to envisage with lots of possible stress points, capital expenditure would remain a priority item which the government would like to preserve and ensure continues at the budgeted level. The secretary described the current global uncertainties as having thrown a very challenging situation for India, but highlighted that India's fiscal prudence has put the country on a very good footing in the current unpredictable times. As per Moneycontrol.com, Mittal stated that while LPG fiscal stress is indeed a reality, the government will preserve the capex commitment to ensure it continues at the budgeted level.
Tax collections could be impacted after the government cut excise duties on petrol and diesel in late March to contain domestic fuel prices amid the crude oil surge. As reported by The Times of India, the excise duty reduction is estimated to cost the exchequer around ₹7,000 crore for a 15-day period. The next few months and the coming year may see 'a lot of stress points', with tax buoyancy also likely to come under pressure. According to ETLegalWorld, Vualnam noted that tax buoyancy will also have been looked out for amidst these conditions, which can further squeeze fiscal space. The situation has completely changed from India being called in a Goldilocks moment of high growth and low inflation, as noted by Vualnam at the conference.
Since the start of the West Asia war on February 28, crude oil prices have jumped to a four-year high of $126 a barrel on Thursday from around $73 before the conflict began. According to The Times of India, India imports 60 per cent of its LPG requirement, and of that, 90 per cent passes through the now-closed Strait of Hormuz. The secretary described this as a very challenging situation for the country, as reported by ETLegalWorld. India being a net importer of petroleum products makes the country particularly vulnerable to supply disruptions through the Strait of Hormuz.
The FY27 Budget has pegged the fiscal deficit at 4.3 per cent of GDP, though it is now seen at 4.5 per cent after a downward revision in India's nominal GDP under the new series. As reported by The Times of India, the Centre has imposed an export duty of ₹23 per litre on diesel and ₹33 per litre on aviation turbine fuel to ensure adequate domestic supply. These duty revisions are being reviewed every fortnight. To contain retail prices of petrol and diesel from rising amid the ongoing West Asia war, the government has cut excise duties, which poses a risk of fiscal slippage, according to ETLegalWorld.
Highways, railways, shipping, ports and urban development would be the key focus sectors for FY27 capital expenditure, according to The Economic Times. The government has remained proactive and has responded to changing conditions with agility, with India's fiscal prudence placing the country in a stronger position to manage current uncertainty. The secretary emphasized the government's commitment to providing required funds despite all stress points that may come up, as reported by ETLegalWorld. Vualnam stated that the government has been proactive in trying to tackle each situation with agility, but the country's fiscal prudence has put it on a very good stead in the current unpredictable times. Additionally, the government will remain focused on R&D and streamlining procedures to improve the ease of doing business, with quality of expenditure and performance of government's manpower pool being key priorities from an expenditure perspective.
