After a gap of over two years, the Centre has reported a fiscal surplus of Rs 11,040 crore and a revenue surplus of Rs 42,509 crore in July thanks to buoyancy in tax collections and reining of revenue expenditure even as capex continued the robust momentum. The last time India had a fiscal surplus was in March 2020.
The fiscal deficit in April-July of the current fiscal came at 20.5% of the budget estimate (BE) for FY23, down from 21.3% of the corresponding target a year ago, aided by higher net tax revenues and moderation in revenue spending as the Centre tightened fund releases by linking it to actual progress in spending of previous releases.
The Centre, which has put a thrust on capex to boost economic growth, continued the momentum by almost doubling the spending on year in July to Rs 33,606 crore while it invested 62% more on year in April-July at Rs 2.09 trillion.
About a 14% decline in revenue expenditure, led to about a 2% on-year dip in total expenditure in July 2022. However, in the April-July period of the current fiscal, revenue spending rose by 5% on the year.
In April-July of FY23, net tax revenue growth remained strong at 26% as against the budgeted growth of 6% to achieve the full-year target of Rs 19.35 trillion. In the first four months of FY23 net tax revenue was 34.4% of the budget estimate for the year. According to a FE analysis, the Centre’s net tax revenue could exceed BE by about Rs 1.6-1.7 trillion (including windfall taxes on petroleum products).
“The final revenue outcome will be better than the budget proposals due to low revenue buoyancy assumed in the budget and pessimistic nominal GDP growth assumption. Despite higher expenditure outgo due to higher fertiliser subsidy and low excise duty collection due to cut in excise duty of petroleum products, the government is likely to achieve its FY23 fiscal deficit target comfortably,” said India Ratings economists Sunil Kumar Sinha and Paras Jasrai.