As the spectre of Indian basket of crude averaging much above the level assumed in the Budget for FY23 looms large, the government will have a tough task ahead. It will have to avoid a big fiscal slippage and thereby refrain from stoking an already elevated inflation, but continue to support economic growth.
Economists who FE spoke to believe the government indeed has some space for tax cuts on auto fuels, given the ‘conservative revenue estimates’ for the next year. A government official said some expenditure rationalisation measures could be undertaken if revenues come under severe pressure. The government’s fiscal response to the situation that have arisen from the Russia-Ukraine war would depend on how it evolved over the next few weeks, he added.
