New Delhi, May 1: The government will proceed with the planned Rs 12.22 lakh crore capital expenditure in the current fiscal to maintain the growth momentum despite the fiscal stress arising from the ongoing West Asia conflict, a senior official said on Friday.
Expenditure Secretary V Vualnam said the upcoming few quarters and the coming year would possibly have a “lot of stress points”. Tax buoyancy could be impacted by a cut in excise duties on petrol and diesel brought about in late March.
“The fiscal stress is indeed very much a reality, but at the same time… the capex would really be a priority item, which we would like to preserve and ensure that it continues at the budgeted level,” Vualnam said at the ICPP Growth Conference organised by the Ashoka University.
He said highways, railways, shipping, ports, and urban development sectors would be the focus areas for FY27 capex.
Stating that the current global uncertainties have thrown a “very challenging situation” for India with the country being a net importer of petroleum products, he said the government has been “proactive” in trying to tackle each situation with “agility”.
But, India’s fiscal prudence has put the country on a very good stead in the current unpredictable times, he added.
“We will, on our part, be committed to see that the required funds are provided in spite of all the stress points that may come up,” he said.
The FY27 Budget has pegged the fiscal deficit at 4.3 per cent of GDP, which is now seen at 4.5 per cent of GDP, following a downward revision in India’s nominal GDP under the new series.
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. The excise duty cut is estimated to cost Rs 7,000 crore to the exchequer for a Period of 15 days.
Since the beginning of the war in West Asia on February 28, Crude oil prices have soared to a four-year high of USD 126 per barrel on Thursday from about the USD 73 level before the war.
“The next few months, the next quarter and the coming year are indeed very difficult to envisage, lots of possible stress points,” he said.
Tax buoyancy will also have been looked out for amidst these conditions, Vualnam said, which can further squeeze fiscal space.
India imports 60 per cent of its LPG usage, and of that, 90 per cent flows through the now closed Strait of Hormuz, the Secretary said, adding that it would be a “very challenging situation”.
The government has also levied an export duty of Rs 23 per litre on diesel and Rs 33 per litre on aviation turbine fuel to ensure adequate domestic availability of the fuels. These duty changes are being reviewed by the Centre every fortnight.
