A 63.4 per cent increase in the Centre’s capital expenditure has widened the country’s fiscal deficit by around 59 per cent of the Budget estimate (BE) in April-November 2022.

Data released by the Controller General of Accounts (CGA) on Friday showed that capex in the period under review rose to over ₹4.47-lakh crore as against over ₹2.73-lakh crore in the year-ago period. The government has set a capex target of over ₹7.50-lakh crore for the current fiscal.

The Road Ministry spent the most (₹1.58-lakh crore) in the nine months of the current fiscal as against over ₹80,000 crore in the year-ago period Railways spent over ₹1.42-lakh crore (₹66,000 crore); other Ministries, too, performed well.

The fiscal deficit, as a result of higher spending, reached over ₹9.78-lakh crore as against ₹6.95-lakh crore in April-November 2021, data showed.

Draining balance

In a note, Devendra Kumar Pant (Chief Economist) and Paras Jasrai (Analyst) of India Ratings & Research (Ind-Ra), said fiscal deficit during April-November 2022 was the second lowest in the last 11 years. Higher transfer to States in the form of share in Central taxes and slowdown in gross tax revenue put a dent on the government’s cash balance with the RBI. As of end-November, the balance stood at ₹1.55-lakh crore as against ₹2.24-lakh crore at end-October.

Additionally, the government has borrowed ₹9.63-lakh crore from the domestic market and ₹14,975 crore externally. “Ind-Ra expects the strong revenue collection growth to slow down in the rest of FY23 due to a combination of lower real growth and decline in inflation in H2 FY23. However, despite this, financing additional expenditure due to higher food and fertilizer subsidy or any other unforeseen expenditure is unlikely to destabilise budgetary fiscal arithmetic,” the note said.

Aditi Nayar, Chief Economist, ICRA said based on the additional cash outgo announced in the First Supplementary Demand for Grants for FY23 and the expectations on generation of savings of around ₹1-lakh crore as seen in the recent past, “We estimate the extent of overshoot in the fiscal deficit at around ₹0.8-lakh crore for FY23. As a proportion of GDP, the fiscal deficit is unlikely to exceed BE of 6.4 per cent.”