Revenue Secretary Tarun Bajaj on Friday said the government is sticking to the fiscal deficit target of 6.4 per cent of GDP for the financial year 2022-23 and is not looking at additional market borrowing. He added that the US Federal Reserve rate hike of 75 basis points (bps) has been factored in by Indian markets.
Bajaj told CNBC-TV18 that the windfall tax will be removed if the crude oil price falls. “All of us are getting adjusted to the new norm of windfall tax. If the rates go down, we will reduce the taxes. This is very important for the companies. If the international price of crude goes up, the tax rate will move up. There is stability for the companies because what they are getting they will continue to get.”
Earlier this month, the government imposed a cess of Rs 23,250 per tonne on domestic crude oil producers, as they were getting windfall gains on their sales because of high international crude prices.
On the fiscal deficit, Bajaj said, “I can officially say that we will stick to our fiscal deficit target of 6.4 per cent. Our revenues are robust, we are also keeping a tab on expenditure. There will be some downsides to revenues and the RBI dividend is lower. I am sure we will be able to take care of this through higher revenues and controlling expenditure. Absolutely no additional market borrowings at the moment.”
He added that the government will keep assessing the situation. “Right now, I don’t see any headwinds on that factor.”
The fiscal deficit is the difference between the government’s total expenditure and revenue. Presenting the annual budget in February, Finance Minister Nirmala Sitharaman fixed the fiscal deficit target at 6.4 per cent of the GDP for the current financial year 2022-23, compared with 6.7 per cent in the previous fiscal year.
On the US Fed Hike, He said markets were expecting this kind of Fed rate hike and they have already factored in this. If the US economy is not going into recession, it is a positive, that is a good sign.
Bajaj also said, “Once the rate hikes are absorbed, there will be some cooling off in the US economy. Overall, it’s positive. The US economy is very important to the world. The rupee is also holding on. That’s a sign of our markets reading into the Fed rate hike. We will see what the RBI in its next policy meeting does.”
The US Federal Reserve has raised its key interest rate by 75 basis points increase, jacking the central bank’s overnight interest rate from near zero to a level between 2.25 per cent and 2.50 per cent.
The US central bank said it would not flinch in its battle against the most intense breakout of inflation in the US since the 1980s even if that means a “sustained period” of economic weakness and a slowing jobs market.