The fiscal deficit of the Centre hit 82.8% of the revised estimate (RE) until February of the current fiscal year, slightly higher than the 82.7% recorded in the previous year, according to the data released by Controller General of Accounts (CAG). In terms of absolute numbers, the fiscal deficit amounted to ₹14.54 lakh crore during the first 11 months of FY23 as compared to ₹13.17 lakh crore during the same period the previous year.
The 2023 Budget saw an increase in the Centre’s fiscal deficit target for 2022-23. It has increased from Rs 16.61 lakh crore to Rs 17.55 lakh crore. However, due to the projected expansion of India’s economy exceeding the Budget estimate, the fiscal deficit as a percentage of GDP is expected to remain unchanged. It will remain at the initial target of 6.4 percent.
Despite being on track to meet the fiscal deficit target, the Centre’s financial situation in February showed some challenges. On the positive side, gross tax revenues increased by 12 percent between April and February, although the growth rate in February alone was only 4.5 percent.
“Gross tax revenues need to grow by 14 percent on a year-on-year basis in March to meet the FY23 Revised Estimate, including a 32 percent expansion in corporation tax, which seems somewhat optimistic,” said ICRA’s chief economist, Aditi Nayar
In April-February, there was an 11.6 percent increase in total receipts. It rose by 11.1 percent in April-February but decreased by 2.6 percent in February. However, there is cause for concern as the Centre’s expenditure in February was down due to a decrease in capital expenditure. It was just Rs 20,335 crore compared to Rs 43,495 crore in February 2022. This is the lowest amount spent on capital expenditure since July 2021. To reach the full-year capex target of Rs 7.28 lakh crore, the Centre should have spent Rs 1.38 lakh crore in February. In February, the fiscal deficit was Rs 2.63 lakh crore, a decrease of 30.5 percent compared to February 2022.
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Furthermore, Investment Information and Credit Rating Agency of India, ICRA says that the fiscal deficit for 2022-23 will not significantly surpass the revised target of Rs 17.6 lakh crore, although some variations may occur in corporate tax, disinvestment receipts, and particular expenditure categories after the supplementary demand for grants.
The Union Budget presented by Finance Minister Nirmala Sitharaman in the Lok Sabha on February 1 proposed a fiscal deficit target of 5.9 percent of GDP for 2023-24. For the current fiscal year ending in March 2023, the deficit remains at 6.4 percent of GDP, and the government borrows from the market to finance its fiscal deficit.
Reportedly, the government aims to reduce the fiscal deficit below 4.5 percent of GDP by 2025-26.
