Govt underlines need for a flexible Budget in view of external shocks, global turmoil

The upcoming budget will need to have flexibilities to ensure that the intended fiscal glide path can be met amid external shocks and global uncertainties, the govt said on Tuesday.

“Effective management of the exogenous shocks and global uncertainties requires the additional flexibilities in terms of expenditure management and fiscal consolidation,” it said.

The statement was part of the government’s Fiscal Responsibility and Budget Management (FRBM) Act presented to the parliament.

It may be noted here that the Centre’s fiscal deficit target is 4.5% of GDP by the end of 2025-26.

The government’s statement came by way of explanation for it not being able to table its rationale for deviating from the fiscal deficit glide path during the pandemic.

According to the government, “Three continuous COVID-19 waves, ongoing Russia Ukraine conflict and global economic uncertainties have affected almost all macroeconomic indicators.”

Fiscal deficit jumped to a record 9.3% in 2020-21, from 4.6% the previous year on account of pandemic-linked spending.
There is a risk of there being major differences between projected numbers and final numbers amid the ongoing global turbulence, the govt said.

The government said that Indian economy has fared better than other major economies. The commitment towards strong macroeconomic fundamentals and financial stability very much remains, it added.

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