With tax and non-tax revenues expected to exceed the budget estimate (BE), the Centre’s fiscal deficit target of 5.9% of GDP will be met in the current financial year despite a likely shortfall in disinvestment receipts, a senior finance ministry official told FE.
“Revenues will be around the budget estimates in aggregate. Non-tax revenues may outperform because of higher dividends, but a possible shortfall in disinvestment will be offsetting that,” the official said.
The assessment is in the wake of completion of the first quarter of the financial year. The fiscal deficit for April-May stood at Rs 2.10 trillion, or 11.8% of the estimate for the full year, as against 12.3% of the corresponding annual target in the year-ago period. The net tax revenue in the first two months of the fiscal was down 10.4% to Rs 2.78 trillion, but the advance tax collections for the first quarter indicated a bridging of the shortfall.
For the financial year 2023-24, the Centre has budgeted total dividend receipts of about Rs 91,000 crore. This includes “Rs 48,000 crore from the Reserve Bank of India (RBI), public sector banks and financial institutions”, and Rs 43,000 crore from the Central Public Sector Enterprises (CPSEs).”
On May 19, the RBI alone transferred a surplus of Rs 87,416 crore to the Union government for the accounting year ended March 31. Given the larger receipts from the RBI and likely healthy profits of state-run banks, FIs and CPSEs, the Centre’s total dividend receipts could exceed the budget target by around 60,000 crore in FY24. According to FY24BE, non-tax revenues including dividends were estimated to rise 5.4% on year to3 trillion.
On the other hand, the Centre has set a disinvestment revenue target of Rs 51,000 crore for FY24, 45% higher than Rs 35,293 crore achieved in FY23.
While some of the disinvestment transactions including the strategic sale of IDBI Bank are on track, doubts linger on the prospect of a 30.8% stake sale in Container Corporation (ConCor) as the expression of interest for it is not yet floated. So far, disinvestment receipts stood at Rs 4,235 crore or 8.3% of the annual target.
However, direct tax collections (post-refunds) till June 17 of the current financial year came in at Rs 3.8 trillion, up 11.2% on year. This was higher than the 9.4% growth projected for the whole fiscal to achieve the annual target of Rs 18.23 trillion. Indirect tax receipts are also growing at a faster pace than the required rate of 10.6% to achieve the FY24 target of Rs 15.37 trillion. Monthly gross Goods and Services Tax (Centre and states) receipts have averaged Rs 1.69 trillion in the first three months of FY24, handsomely exceeding the monthly target of Rs 1.5 trillion.
“As of now (Q1), both revenue expenditure and capital expenditure are progressing as per the budget plan. The fiscal deficit will be reined in at the budgeted level in FY24,” the official said.
With half a dozen states going to assembly elections by 2023-end, the Union government has asked all ministries to accelerate capital expenditure and spending on Centrally Sponsored Schemes (CSS).
The idea is to maximise spending in the first half of the year so that at least 50% of the annual budget capex is implemented by September-end and 75% by December-end. In the last fiscal year, these figures were 45.7% and 65.4%, respectively.
The Centre has raised the capex target by 36% on-year to `10 trillion (including Rs 1.3 trillion capex loans to states) for FY24 from Rs 7.36 trillion (including Rs 81,200 crore to states) in FY23, to continue the public investment-led economic recovery.
Ministries are undertaking a drive to expedite both capex and CSS expenditure within the first 2-3 quarters.
“Buoyancy in GST collections, higher-than-budgeted RBI’s dividend surplus transfer and the expected favourable impact of lower commodity prices on corporate margins and corporation tax collections indicate that the Centre’s revenue receipts may not be undershot in FY24, notwithstanding some shortfall in disinvestment receipts vis-à-vis the target,” rating agency Icra chief economist Aditi Nayar said.
Revenue expenditure seems unlikely to exceed the FY24 BE of Rs 35 trillion at the current juncture, amid the discontinuation of the free foodgrains scheme and the dip in the global prices of fertilisers, Nayar said. However, demand for jobs under the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) could increase if El Nino hurts the rural economy, thereby necessitating higher budgetary allocations, she added.