New Delhi: The latest official data released by the Controller General of Accounts (CGA) on Tuesday showed that the Union government’s fiscal deficit has hit the 68% mark in the first 10 months of the current financial year ending in March 2023. The fiscal deficit during the corresponding period of the last financial year was significantly lower at just 59%. It causes concerns about whether increasing expenditure and borrowing requirements may unsettle the government’s fiscal mathematics.
It also raises the larger question of whether finance minister Nirmala Sitharaman would be able to stick to her target of keeping the fiscal deficit at 6.4% of the GDP in the current financial year. On the face, it appears to be a difficult task as the Centre has already borrowed more than Rs 11.9 lakh crore of the revised estimate for the year which was pegged at over Rs 17.55 lakh crore.
The official data released Tuesday has some pointers on whether the government will be able to stick to its fiscal deficit target or not. For example, the gross tax revenue of the Union Government registered an increase of more than 13% in January on a year-on-year basis. Moreover, the net tax revenue of the Union government registered an increase of more than 80 % in January this year.
This happened mainly due to the share of states in central taxes returning to the normal run rate of Rs 583.33 billion a month in January 2023. In the last financial year (April 2021-March 2022), the Centre had transferred additional revenue to states in the months of November, January, February and March. However, in the current financial year (April 2022-March 2023), the share of states in central taxes was transferred in the months of August and November.
If one looks at the Centre’s revenue receipts and revenue expenditure during the first 10 months of this financial year then the Centre was able to collect over Rs 19.19 lakh crore, nearly 82% of its revenue receipt target as per the revised estimates. However, it was on the higher side in the last fiscal when the Centre was able to collect nearly 85% of its revenue collection target in the first 10 months.
As against this, the Centre’s revenue expenditure in the first 10 months hit a record Rs 26 lakh crore or 75% of the revised estimate during this period, which is the highest for the last three financial years.
According to Sunil Sinha, Principal Economist of India Ratings and Research, relatively higher expenditure and lower revenue as a proportion of FY 2022-23 (RE) as against the expenditure during the same period of last fiscal may exert some pressure on the Union government’s finances. He, however, said that a buoyant GST revenue collection is expected to provide comfort.
The data showed that Central GST collection in the first 10 months has been over 82% of the revised estimate. Despite a buoyant GST collection, there could be another pressure on the Centre’s finances on account of increasing fertilizer subsidy which has already hit the mark of 92% in the first 10 months of this fiscal with the Centre’s overall subsidy bill hitting the mark of 77% during this period.
However, the biggest relief to the Union government against a ballooning fiscal deficit comes from its cash balance of Rs 1.75 lakh crore that is available with the Reserve Bank of India (RBI). “The government’s cash balances with the RBI will be useful in limiting the borrowing and will help in easing liquidity in the system,” Sinha told ETV Bharat. “Therefore, we believe that it is unlikely that there will be a risk to the fiscal deficit target of 6.4% of GDP for FY23.”
