India’s April-July fiscal deficit recorded at 20.5% of FY23 target

India’s fiscal deficit during the first four months of the ongoing financial year was at Rs 3.4 trillion or 20.5 per cent of the annual target, according to government data. In April-July 2021, the Centre’s fiscal deficit was Rs 3.2 trillion or 21.3 per cent of last year’s target.

The country’s fiscal deficit is projected at 6.4 per cent of GDP for the year ending March 2023, as against 6.71 per cent for the previous year.

The Centre’s total receipts stood at Rs 7.86 trillion or 34.4 per cent of this year’s target; during the corresponding period a year ago, the figure stood at 34.6 per cent of last year’s Budget estimate.

Total expenditure during April-July 2022 was Rs 11.26 trillion or 28.6 per cent of the year’s target.

The government was able to record a fiscal surplus in July as it cut its expenditure during the month. The Centre’s total expenditure in July was Rs 1.78 trillion against Rs 3.62 trillion in June. Total receipts in July were Rs 1.89 trillion.

Relatively stronger receipt growth and weak expenditure growth in July 2022 led to a fiscal surplus, which was last witnessed in March 2020, said Sunil Kumar Sinha, principal economist at India Ratings.

In the April-July period, the Centre’s tax revenue was Rs 6.6 trillion or 34.4 per cent of the full-year target. Non-tax revenue took a hit with Rs 89,583 crore mopped up in the first four months, meeting 33 per cent of the year’s target; this was 36 per cent lower than last year. This was mostly because of a major decline in dividend received by the Centre; the Reserve Bank of India in May announced it would transfer Rs 30,307 crore as dividend against Rs 99,122 crore last year.

The Union government’s gross tax revenue during April-July was 25 per cent higher than last year, and stood at Rs 8.69 trillion. The corporate tax collected in the first four months was Rs 1.96 trillion, against Rs 1.46 trillion collected in the same period last year. Income tax collected was Rs 2.42 trillion as compared to Rs 1.61 trillion last year.

“Based on present growth and inflation trend, Ind-Ra expects the Union government to exceed its FY23 net tax revenue target (INR19.347 trillion),” said Sinha. Non-tax revenue collections in the first four months were 33.2 per cent of FY23 Budget target, and if envisaged disinvestment does not go through, there may be challenges for the Union government’s finances, Sinha said.

The Centre spent Rs 1.1 trillion or 35 per cent of the full year’s estimate for food, fertiliser, and petroleum subsidies.

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