Robust revenues helped the Centre to contain its fiscal deficit in the first seven months of the current financial year at just 36.3% of budget estimate (BE) for the whole of year, causing analysts to predict that the annual target might not be exceeded.
The corresponding figures for the comparable periods in FY21 and FY20 were 119.7% and 102.4%, respectively.
Both revenues and expenditures are seen overshooting the respective budget targets by `1.5-2 lakh crore each in the current fiscal year, allowing the deficit target of 6.8% of the GDP to be met.
In April-October of FY22, the Centre’s net tax receipts rose 83% on year to Rs 10.53 lakh crore or 68.1% of FY22BE.
This was in comparison to 35.2% of the corresponding annual achieved in the year ago period and 41% of the relevant target met during the same period in pre-pandemic year (FY20).
The Centre’s gross tax revenue (GTR) grew by 56% on year in April-October of FY22 compared with the required rate of 9.5% to achieve the annual target of Rs 22.17 lakh crore. The GTR in the first seven months of FY22 was 30% higher than the corresponding period of FY20.
However, the Centre’s next tax revenue will moderate from November as the excise duty cuts on petrol and diesel will likely cost the government Rs 65,000 crore in November-March of FY22.
After rising 83% on year in September 2021, the Centre’s capital expenditure fell 24% on year in October. Revenue expenditure grew by 17% on year in October 2021.
The Centre’s capex in April-October of FY22 stood at Rs 2.53 lakh crore (annual rise of 28%) or 45.7% of the annual target against 47.9% of the relevant target achieved a year ago. Total expenditure stood at Rs 18.27 lakh crore (annual rise of 10%) or 52.4% of the full-year target, compared with 54.6% a year ago. Data released by the Controller General of Accounts on Tuesday put the Centre’s fiscal deficit for April-October of FY22 at Rs 5.47 lakh crore against the BE for FY22 of Rs 15.07 lakh crore.
Despite the likely revenue foregone from the excise and customs duty relief, the gross tax revenues of the government are likely to exceed the FY22BE by Rs 1.8 lakh crore, of which around `60,000 crore would be shared with the states, Icra chief economist Aditi Nayar said. “Adding the higher than budgeted surplus transfer by the RBI to the extra net tax revenues, we expect the government’s net revenue receipts to exceed the FY22 BE by Rs 1.7 lakh crore,” she wrote.
According to Icra estimate, the total expenditure to overshoot the FY22BE by Rs 1.3-1.5 lakh crore, based on the net outgo related to first supplementary demand for grants, recent enhancement in food subsidy outgo towards the PMGKAY, increase in fertiliser subsidy for the rabi season, and the likely enhancement in the allocation for the MGNREGA and the new export benefit RoDTEP scheme.
“If the proceeds of the BPCL disinvestment and LIC IPO are both not realised in FY22, the government’s fiscal deficit may print at Rs 15.8-16 lakh crore (6.9-7% of GDP), exceeding the BE of Rs 15.1 lakh crore (6.8%),” Nayar said.
In April-October 2021, corporation tax (annual increase of 92%) and customs duty collection (122%) have led revenue receipt growth. Despite 56% growth in gross tax revenue in April-October 2021, states’ share in central taxes has grown just 3.5%. One additional installment of central tax devolution to states in November will make some change in the devolution growth rate.