The Centre’s fiscal deficit widened to 25.3% of the full year target between April and June 2023 as capital expenditure surged and tax revenue remained muted. The fiscal deficit amounted to Rs 4.51 lakh crore in the first quarter of FY24 as against the full year estimate of Rs 17.86 lakh crore, as per official data released on Monday.
It was lower at Rs 3.5 lakh crore or 21.2% of the Budget estimate in the corresponding period in FY23.
Capital expenditure amounted to Rs 2.78 lakh crore or 27.8% of the full year between April–June 2023, which was much higher than Rs 1.75 lakh crore in the corresponding period last fiscal. The Centre has budgeted Rs 10 lakh crore of capex this fiscal in a bid to help boost economic growth and is keen that the spending remains well paced throughout the year. Rs 1.1 lakh crore of capex was released in June as against Rs 89,332 crore in May this year.
Total expenditure amounted to Rs 10.5 lakh crore during April-June 2023, which was 23.3% of the Budget Estimate.
While revenue receipts remained robust at Rs 5.88 lakh crore in the first three months of the fiscal, net tax revenue was Rs 4.33 lakh crore, which was a 14% contraction on an annual basis. Net tax revenue was higher in the corresponding period of FY23 at Rs 5.05 lakh crore. ICRA said this was due to the accelerated tax devolution to the state governments which offset the sharp jump in non-tax revenues.
“Gross tax collections recorded a mild 3% rise in Q1 FY2024, with a continuing contraction in corporate tax collections, offsetting the growth in private income tax and GST collections. With a double installment released in June 2023, central tax devolution rose to Rs 2.4 lakh crore in Q1FY24 from Rs 1.4 lakh crore in Q1FY23, contributing to the YoY contraction in net tax revenues,” said Aditi Nayar, Chief Economist, Head - Research & Outreach, ICRA.
Corporate tax collections fell 13.7% year on year to Rs 1.38 lakh crore between April to June 2023.
The Centre released Rs 72,900 crore as tax devolution in July 2023, taking the aggregate amount to Rs 3.1 lakh crore, which is about a third of the Budget Estimate (BE). According to Nayar, to meet the BE, the Centre has to release Rs. 7.1 lakh crore to the states in the next eight months. “This would contain the incremental fiscal deficit in some of the ensuing months,” she cautioned.
The Centre hopes to lower its fiscal deficit to 5.9% of the GDP in 2023-24 from 6.4% in 2022-23.