Centre's Fiscal Deficit At 82.7% Of Estimate Following Record High Devolution To States

The central government's fiscal deficit for April 2021-February 2022 came close to its revised estimates for the full fiscal. This came as the centre made a large transfer to states on account of devolution of taxes.

The fiscal deficit for the April-February period stood at Rs 13.16 lakh crore or 82.7% of the revised estimate, according to data from the Controller General of Accounts published on Thursday. The fiscal deficit stood at Rs 9.38 lakh crore until January 2022.

"The release of a massive Rs 2.4 lakh crore as central tax devolution to the states in the month of February 2022, by far the largest monthly release, contributed to a widening in the government's fiscal deficit between January and February 2022, and precipitated the decline in the government's cash balance," said Aditi Nayar, chief economist at ICRA.

The devolution of Rs 2.42 lakh crore to states, was against an average of Rs 54,539 crore per month for April 2021 to January 2022, according to a note by India Ratings & Research.

With this, the total amount of central tax devolution released in April-February for FY22 is already around Rs 0.43 lakh crore higher than the FY22 revised estimates, Nayar said.

Total expenditure was at Rs 31.43 lakh crore; 83.4% of revised estimate, compared to 81.7% in the corresponding period an year ago.

• Capital expenditure stood at Rs 4.85 lakh crore — 80.6% of revised estimate, compared to 92.4% an year ago.

• Revenue expenditure stood at Rs 26.59 lakh crore — 83.9% of revised estimate, compared to 80.1% an year ago.

Revenue receipts stood at Rs 17.91 lakh crore or 86.2% of the revised estimate, compared to 88.1% in the corresponding period an year ago.

• Net tax revenue stood at Rs 14.8 lakh crore or 83.9% of the revised estimate compared to 90.4% an year ago.

• Non-tax revenue stood at Rs 3.1 lakh crore or 98.8% of the budget estimate, compared to 73.2% in the last financial year.

The government's gross tax revenues are estimated to exceed the FY22 revised estimate by at least Rs 1 lakh crore, which would be on account of non-excise revenues, and therefore, 42% of the same would be shareable with the states, Nayar said.

"The additional estimated devolution above the revised estimate also works out to a similar Rs 0.42 lakh crore, which leads us to wonder whether any additional tax devolution was released to the states in March 2022."

Mostly, the transfer of excess funds to states based on the revised estimates takes place in the month of March, but has taken place in February this year, Sunil Kumar Sinha, principal economist at India Ratings said.