India'sfiscal deficit for the 10 months through January touched ₹11.91 lakh crore , nearly 68 per cent of annual estimates, as against 59 per cent of the last fiscal, government data showed on Tuesday. The expectation now is that even if non-tax revenue is less than the estimate, it is unlikely to affect fiscal deficit target.

Fiscal deficit refers to higher expenditure than the income of the government.

While the budget estimate for FY23 was over ₹16.61 lakh crore, the revised estimate is over ₹17.55 lakh crore. However, as the size of nominal GDP (Gross Domestic Product) has gone up, there is no change in the fiscal deficit as a percentage of GDP.

The government aims to end the current fiscal year with a Budget deficit of 6.4 per cent.

Data made public by the Controller General of Accounts on Tuesday showed that tax collection in the first ten months has reached around 81 per cent of the revised estimate. Its growth as compared to the corresponding period of FY22 is less than 10 per cent. Collection in direct taxes (Personal Income Tax: 14.85 per cent and Corporate Income Tax: 18.88 per cent) and Central GST (24.52 per cent) has shown very good growth. The same is true of custom. However, collection from Central Excise underwent de-growth (19.26 per cent).

Also read: Budget 2023: Tax collection at source dampener for overseas tours, global stock purchases

In terms of expenditure, capital expenditure recorded a growth of over 26 per cent, while for revenue expenditure, it was over 9 per cent.

Net tax receipts rose to ₹16.89 lakh crore, while total expenditure was ₹31.68 lakh crore, the data showed.

Aditi Nayar, Chief Economist with ICRA, said gross tax revenues need to grow by 11 per cent on a YoY basis in Feb-March FY23 to meet the FY23 RE, led by direct taxes, which seems somewhat optimistic. Considering the collection of net direct taxes in the first 10 months, the growth needed in the last two months to meet the FY23 RE appears optically high at 55 per cent, it will be supported by the expected contraction in tax devolution in the last two months of this fiscal. The amount that remains to be devolved to the states in Feb-March FY23 as per the RE, is around 21 per cent lower than the transfer of ₹3.5 trillion in Feb-March FY22, which will boost the net tax revenues in the remainder of this year. 

Also read: To stay put on fiscal deficit glide path, Govt must moderate capex momentum: Crisil report

“While there may be modest deviations from the revised estimates for direct taxes, disinvestment receipts and certain categories expenditures, ICRA does not expect the fiscal deficit to materially exceed the revised target of ₹17.6 lakh crore for FY23,” she said.

Anil K Sood, Professor and Co-Founder with the Institute for Advanced Studies in Complex Choices, expects the current year’s fiscal deficit to be in line with the level projected at the time of the budget presentation. During the presentation, the government indicated that it has started the process of fiscal consolidation. January release of expenditure data does suggest that it is living by that promise and may even do better.

“Capital expenditure, other than on Road Transport and Railways, is likely to be lower than the revised estimates. Both these ministries have either front-loaded their expenditure or they may exceed their revised budget. Ministry of Defense is not likely to use a large part of its capital expenditure budget” he said.

Also read: Budget 2023: FM Nirmala Sitharaman hikes allocation for defence, announces ₹4,000 crore in tax sops for Agniveers