The Centre’s fiscal deficit touched 36 per cent of the Budget Estimate in April-August period of fiscal year 2023-24. It was 33 per cent during corresponding period of last fiscal.

The Centre has set a target of ₹17.87-lakh crore which is 5.9 per cent of GDP which was 6.4 per cent in FY23. Fiscal deficit is difference between income and expenditure. It is an indication of the total borrowings that are needed by the government.

In absolute terms, the fiscal deficit was ₹6.42-lakh crore as of August-end, according to the data released by the Controller General of Accounts (CGA). During this period, the net tax revenue was ₹8.03-lakh crore, or 34.5 per cent, of the BE for the current fiscal. The net tax revenue collection was 36.2 per cent at August-end 2022. The Central government’s total expenditure in the first five months stood at ₹16.71-lakh crore, or 37.1 per cent, of the BE. The expenditure was 35.2 per cent of the BE a year ago.

Total expenditure

Of the total expenditure, ₹12.97-lakh crore was on the revenue account and ₹3.73-lakh crore towards the capital account.

According to Aditi Nayar, Chief Economist with ICRA, gross tax collections expanded by a healthy 17 per cent in April-August period with a near-doubling in the flows in August, led by direct taxes. Moreover, while tax devolution in August was in line with the previous month, it was lower in YoY terms as a double tranche had been released in August. As a result, net tax revenues for August 2023 stood at a healthy ₹2.2-lakh crore, a multifold increase from the muted ₹0.3-lakh crore during last August.

“To meet the FY24 BE, the Centre has to release ₹6.4-lakh crore to the States in the next seven months, which is nearly the same as the amount devolved in Sept-March in FY23 as per ICRA’s calculations. This would contain the incremental fiscal deficit in some of the ensuing months,” she said.

Higher than budgeted dividend surplus transfer of ₹87,420 crore billion from the RBI is likely to provide some cushion to meet any undershooting in other revenues streams including disinvestment or potential overshooting in expenses, relative to respective BE, such as MGNREGA.

Overall, “we see limited fiscal concerns at this stage, as corroborated by the unchanged market borrowing numbers for H2 FY2024, relative to the amount indicated in the Budget Estimates,” she said.

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