Up-fronting of tax devolutions and higher expenditure pushed the Centre’s fiscal deficit to Rs 6.1 lakh crore or 34 per cent of the budget estimate during the April-July period of the current fiscal (2023-24). This is nearly 78 per cent higher than last fiscal.

The deficit during the corresponding period of the last fiscal was ₹3.4 lakh crore or 20.5 per cent of the budget estimate.

According to data put up on its website by the Controller General of Accounts (CGA), over ₹3 lakh crore has been transferred to State Governments as Devolution of Share of Taxes by the Centre during the April-July period, which is over ₹1.08 lakh crore higher than the corresponding period of previous year. Based on the 15th Finance Commission’s recommendation, 41 per cent of the Centre’s tax revenue is given to 28 States.

During the period under consideration, the total expenditure incurred by the Centre was over ₹13.8 lakh crore, which is nearly 31 per cent BE 23-24), Revenue expenditure recorded a growth of 16 per cent, while capital expenditure rose by 52 per cent. However, revenue during the same period was around ₹7.75 lakh crore, which is 28.5 per cent of the budget estimate. While net tax revenues contracted by 13 per cent, non-tax revenues doubled on the back of the RBI dividend

According to Aditi Nayar, Chief Economist with ICRA, to meet the FY2024 BE, the Centre has to release ₹7.1 lakh crore to the states in the next eight months, which is 5 per cent lower than the amount devolved in August-March in FY2023 as per ICRA’s calculations. “This would contain the incremental fiscal deficit in some of the ensuing months, especially August 2023,” she said.

Higher than budgeted dividend surplus transfer of around ₹88,000 crore from the RBI is likely to provide some cushion to meet any undershooting in other revenue streams, including disinvestment or potential overshooting in expenses, relative to respective BE, such as MGNREGA, she added.