The Centre’s fiscal deficit stood at 12.3% of the full year Budget estimate (BE) in April-May of the current financial year compared with 8.2% in the year ago period, due to a rise in expenditure while non-tax revenues declined substantially on year.
The data released by the Controller General of Accounts on Thursday put the Centre’s fiscal deficit for April-May of FY23 at Rs 2.04 trillion or 65.6% higher than in the first two months of last fiscal.
In April-May 2022, net-tax revenue grew 31.7% on year as against an annual average growth requirement of 6.3% to achieve FY23 target of Rs 19.35 trillion.
However, 69.4% lower surplus, transferred by the Reserve Bank of India to the Centre, resulted in non-tax revenue of April-May 2022 declining by 57.7% on-year.
Continued high inflation leading to higher nominal GDP is expected to help the Centre exceed its tax collection target of FY23.
The Centre has front loaded capex in FY23 leading to 70.1% on-year capex growth the first two months of FY23.
“While cut in excise duties for petrol and diesel will have an impact on Union excise collections, buoyancy in other revenues is likely to compensate for the decline in excise collections. No major threat to the government’s fiscal deficit target even though the fiscal deficit is 65.6% higher than last year during the first two months of FY23,” said India Ratings economists Sunil K Sinha and Paras Jasrai.