India facing twin deficit problem due to commodity prices, subsidy: FinMin
Published On: Tuesday, June 21, 2022 | By: Team KnowMyStock
The finance ministry yesterday(20 June 2022) cautioned the re-emergence of the twin deficit problem in the economy, with higher commodity prices and rising subsidy burden leading to an increase in both fiscal deficit and current account deficit. It’s also the first time the government has explicitly talked about the possibility of fiscal slippage in the current fiscal year.
“As government revenues take a hit following cuts in excise duties on diesel and petrol, upside risk to the budgeted level of gross fiscal deficit has emerged. An increase in the fiscal deficit may cause the current account deficit to widen, compounding the effects of costlier imports, and weaken the value of the rupee, thereby further aggravating external imbalances, creating the risk (admittedly low, at this time) of a cycle of wider deficits and a weaker currency,” the finance ministry said in its latest Monthly Economic Review.
The report said rationalising non-capex expenditure has thus become critical, not only for protecting growth supportive capex but also for avoiding fiscal slippages.
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