IMF sees India meeting its FY24 deficit goal despite extra spending

NEW DELHI (Reuters) – India has room to absorb additional expenditure towards subsidies and rural unemployment programme without raising its fiscal deficit target from 5.9% set for the current financial year, the International Monetary Fund said on Thursday.

Prime Minister Narendra Modi’s party, which faces elections in key states this year and national polls in 2024, has been under pressure to create jobs and help farmers, which may lead to higher than planned expenditure for the year.

“The central government is likely to meet its 5.9% deficit target for FY23-24,” said Krishna Srinivasan, IMF’s director for the Asia and Pacific department.

Earlier, this month, India hiked the cooking gas subsidy for low income households to 300 rupees per cylinder from 200 rupees announced in August.

This could add to the 3.74 trillion rupees of subsidies for food, fertiliser and fuel planned for the current fiscal year, and with elections on the horizon more such measures are expected.

“There’s some pressure on expenditure with higher than budgeted expenditure expense some areas – subsidies, higher MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) expenses. At this stage, we see room in the budget to absorb these unexpected increases,” Srinivasan said.

Earlier this month, IMF raised its growth forecast for Asia’s third-largest economy to 6.3% from 6.1%, reflecting stronger-than-expected consumption.

(Reporting by Jaspreet Kalra; Editing by Tomasz Janowski)