The Centre’s fiscal deficit stood at 58.9% of the annual target in the first eight months of the fiscal year, as compared to 46.2% of the respective projection in the same period in the last fiscal, as the pace of expenditure in recent months remained strong and higher than the budgeted rates.
Capital expenditure grew 87% on year in April-November thanks to the transfers of capex loans to states, while revenue spending rose 15%.
In April-November 2022, the Centre’s net tax collection growth moderated to 8% compared to the mop-up during the year-ago period, while non-tax revenues declined by 11%.
Gross tax revenue increased by 15.5% in the first eight months of the current fiscal to Rs 17.8 trillion, although it declined by nearly 4% in November 2022. Net tax revenue collection in November fell by a sharper 35% year-on-year but still amounted to 63.3% of the full-year target in April-November.
“A mild year-on-year dip in the gross tax revenues in November 2022, led by corporation tax and excise duty, combined with the release of a double tranche of central tax devolution to the states, led the net tax revenues to report a transient contraction in that month,” said Aditi Nayar, chief economist, Icra
Still, the Centre seems to be on track to exceed the Budget estimates for tax collections and is expected to rein in the fiscal deficit within the targeted 6.4% of the GDP for 2022-23.
Between April and November 2022, the Centre’s fiscal deficit stood at Rs 9.78 trillion as compared to Rs 6.95 trillion a year earlier.
Devendra Pant, chief economist, India Ratings and Research, expects the strong revenue collection growth to slow down in the rest of the fiscal due to a combination of lower real growth and decline in inflation in the second half of the fiscal. “However, despite this, financing additional expenditure due to higher food and fertiliser subsidy or any other unforeseen expenditure is unlikely to destabilise the budgetary fiscal arithmetic,” he said.
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Total expenditure increased by 21% in November, moderating slightly from the 59% growth in October. However, with gains from higher tax revenue collection, the Centre is expected to keep the pedal on its spending. “While monthly capex stepped down to Rs 38,099 crore in November 2022 from `66,125 crore in October 2022, the latter marked a sharp year on year jump, which was partly driven by a rise in the capital transfers to states, reflecting the release of funds under the interest free capex loan scheme,” Icra said, adding that it expects the total expenditure of the Centre in the current fiscal to exceed the full year target by Rs 2.3 trillion.