With state governments being slow in the utilisation of Centrally Sponsored Schemes (CSSs) funds and net tax collections seen to exceed the revised estimate (RE), the Centre is comfortably placed to rein in fiscal deficit at the budgeted 6.4% (RE) of the gross domestic product (GDP) in the current financial year.
There won’t be much pressure on the government in this regard, even if the disinvestment target (RE) of Rs 50,000 crore is not met as most of the gap under this head would be covered by extra dividend receipts from the central public sector enterprises (CPSEs).
According to the RE for 2022-23, the Centre is budgeted to spend Rs 4.51 trillion on CSSs, Rs 9,000 crore more than the budget estimate (BE).
So far, the Centre has released Rs 3.1 trillion to states, or about 70% of the CSS outlay for FY23. Of the Rs 3.1 trillion released, Rs 1.75 trillion or more than 56% is still lying with the Single Nodal Agencies (SNAs) of states for implementation of the CSSs. Additionally, about Rs 40,000 crore is lying idle with the state treasuries from previous years’ (pre-FY23) releases of the Centre for such schemes.
Low utilisation of the CSS funds by the states could be partly due to the fact that they failed to contribute their 40% share for these schemes. “It will be difficult for the central ministries to release more CSS funds to states in March unless they spend the balance lying with SNAs or their treasuries,” an official said.
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Even if more funds are released due to political pressure, fresh CSS disbursements would be affected next year due to the huge accumulation of funds at the state level, the official added.
The SNA model requires states to notify an SNA for each CSS. Under the SNA model, funds are released by central ministries to state governments’ accounts in the Reserve Bank of India. Subsequent instalment to the state can be released only after the transfer of earlier central releases from the state treasury to SNA and utilisation of 75% of the central share and state share.
Based on the second advance estimate of GDP published last week, the Centre’s fiscal deficit works out to be marginally higher at 6.45% for FY23 compared with 6.43% based on the first advance estimate of GDP.
While the exact amount of savings under CSS was not yet available, the gap in the deficit was nothing much compared with the likely saving on account of lower spending under CSS and additional net tax revenue receipts.
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The Centre’s net tax receipts stood at Rs 16.89 trillion or about 81% of the FY23RE in April-Janaury. Going by the previous year’s trend, an FE analysis has shown that the Centre’s next tax receipts might exceed FY23RE by about Rs 25,000-50,000 crore. As tax devolutions were frontloaded in the current fiscal, the net tax receipts would show a substantial rise in February-March 2023.
Disinvestment receipts stood at Rs 31,106 crore so far in FY23 or 62% of the RE of Rs 50,000 crore. The government was banking on the sale of a portion of its residual 29.54% stake in Vedanta-controlled Hindustan Zinc to meet the disinvestment target for FY23. Even if the transaction does not happen, the extra dividend receipts from CPSEs could meet most of the shortfall under this head. So far, CPSE dividends stood at Rs 49,282 crore or Rs 6,282 crore more than the RE of Rs 43,000 crore for FY23.