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As the year 2023 draws to a close, two key macroeconomic indicators — fiscal deficit and core sector output growth—released on Friday presented a robust picture of the economy, a sign that the Centre’s balancing of a capex-led growth strategy with fiscal consolidation imperatives has paid dividends this year.
The fiscal deficit for April–November 2023 came in at ₹9.07-lakh crore, or 50.7 per cent of the Budget Estimate, narrower than the 58.9 per cent reported in the year-ago period.
The Centre is aiming to narrow its fiscal deficit to 5.9 per cent of gross domestic product (GDP) by the end of this fiscal year, up from 6.4 per cent last year. The Finance Ministry had recently expressed confidence in meeting this fiscal deficit on the back of robust GDP growth, which could touch 7 per cent this fiscal going by the trend seen in the first two quarters.
The fiscal deficit in November 2023 was half the year-ago level, led by lower tax devolution, a contraction in revenue expenditure, and marginal growth in capex in that month.
Aditi Nayar, Chief Economist, Head Research and Outreach, ICRA, said, “Overall, ICRA does not expect the fiscal deficit target of ₹ 17.9 lakh crore for 2023-2024 to be breached. However, a lower nominal GDP than what the Union Budget had pencilled in could result in the fiscal deficit printing at 6.0 per cent of GDP.”
Higher-than-budgeted dividend surplus transfer by the RBI and healthy direct tax collections would offset the undershooting in other revenue streams (disinvestment or excise duty inflows), she said.
Moreover, expenditure savings and lower-than-budgeted capex are likely to offset the extra allocations under the first supplementary demand for grants, Nayar said.
CORE SECTOR SHINES
There was good news on the core sector front with the aggregate output growth of eight key industries coming in at a robust 8.6 per cent in April-November 2023, higher than 8.1 per cent in year-ago period.
Core sector output in November 2023 hit a six-month low of 7.8 per cent, higher than the 5.7 per cent recorded in November 2023. The latest print was, however, lower than the 12 per cent growth recorded in October 2023.
Six of the eight core industries recorded positive growth in November 2023.
CAPEX PUSH
What is encouraging in the latest fiscal deficit data put out by the Controller General of Accounts is the ramp up in the Centre’s capex spend, which stood at ₹5.86-lakh crore during April–November 2023, or 58.5 per cent of the annual target, higher than ₹ 4.47 lakh crore rupees in the year ago period.
The current dispensation will present an interim budget (vote on account) in February 2024, leaving the full budget to the next government.
However, there is strong indication that the outlay on the Centre’s capex for the next fiscal will be further increased for 2024–25 from the ₹ 10 lakh crore budgeted for the current fiscal. This may happen during the interim budget or when the full-fledged budget is presented in mid-2024 by the next dispensation. Already, analysts are expecting political continuity at the Centre and, therefore, an increased thrust on infrastructure spending in the coming years.
Madan Sabnavis, Chief Economist, Bank of Baroda, said that core sector growth of 7.8 per cent shows steady growth again. The slight moderation has been due to base effects, he said.The high base effect has come in the way of cement production, which has turned negative, he added.
“We can expect IIP growth of upwards of 7-8 per cent this month due to the late festival season,” Sabnavis said.
TAX REVENUES
Total receipts during first eight months stood at ₹ 17.46 lakh crore rupees, while overall expenditure in April to November 2023 came in at ₹ 26.52 lakh crore. They were 64.3 per cent and 58.9 per cent of this fiscal year’s budget estimate.
At the same stage last year, total receipts was at 64.1 per cent of budget estimate. Total expenditure in April-November 2022 was ₹ 24.43 lakh crore.
Revenue receipts during April -November 2023 stood at ₹ 17.20 lakh crore , including tax revenue was ₹ 14.36 lakh crore and non-tax revenue was ₹ 2.84 lakh crore.
Non-tax revenue was bolstered by the Reserve Bank of India approved transfer of ₹ 87,416 crore as surplus to the central government.
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