India economy news: Centre on firm fiscal footing, H1 deficit at 37.3% of FY23 BE

The Centre’s fiscal situation remained comfortable at the end of first half of FY23, as robust tax collection helped offset increased fertiliser and food subsidy burden, data released on Friday showed.

The fiscal deficit at the end of September was 37.3% of the budget estimate for FY23, marginally higher than 35% a year earlier.

In absolute terms, the fiscal deficit, excess of expenditure over revenues that is funded with borrowings, was ₹6.19 lakh crore at the end of September. It was ₹5.3 lakh crore in the first six months of FY22.

The full-year FY23 fiscal deficit is estimated at ₹16.6 lakh crore, or 6.4% of GDP.

Experts see only a marginal slippage from the target. This should help reduce pressure on interest rates amid rising credit demand.


“Factoring the possibility of additional expenditure being partially offset by higher revenue realisations and no shortfall in the disinvestment proceeds we expect the fiscal deficit to be marginally higher at 6.5% of the GDP in FY23,” said Rajani Sinha, chief economist, CARE Ratings.

The Centre’s total receipts at the end of the first half of FY23 stood at ₹12.03 lakh crore or 52.7% of the total budgeted receipt.

This included ₹10.11 lakh crore in tax revenue, ₹1.57 lakh crore in non-tax revenue and ₹34,187 crore in non-debt capital receipts.

Gross tax collection grew 17.6% in April-September FY23 from a year earlier, boosted by strong growth in corporate tax (21.6%), income-tax (25.7%) and central Goods and Services Tax (28.3%).

Net taxes grew a lower 9.9% from a year earlier because of a high 44.6% rise in the transfer of central taxes to states.

Despite a step up in tax devolution and reduction in cesses on petrol and diesel, Aditi Nayar, chief economist of ICRA, expects about ₹2 lakh excess tax collection in FY23 than budgeted.

The robust tax collections have allowed the government to continue to press ahead with capital spending to support growth.

Total expenditure in the first half of FY23 was ₹18.23 lakh crore, 46.2% of the budget estimate.

The capital expenditure was ₹3.42 lakh crore in April-September 2022, up nearly 50% from a year earlier.

India Ratings expects the strong revenue collection growth to continue in the coming months. It does not see “financing additional expenditure due to three-months extension of PMGKAY, increased fertiliser subsidy or any other unforeseen expenditure” destabilising the fiscal arithmetic.

The Centre has so far transferred ₹3.76 lakh crore to states as the share in taxes, which is ₹1.15 lakh crore higher than the previous year.

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