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Fiscal Deficit Reaches 39.3% Of FY24 Target On Highest Ever Capex In September

The fiscal deficit had reached 37.3% of full-year target in the corresponding period last year.

<div class="paragraphs"><p>North block of the central secretariat that houses the Finance Ministry in New Delhi (Photo: Janani Janarthanan/BQ Prime)&nbsp;</p></div>
North block of the central secretariat that houses the Finance Ministry in New Delhi (Photo: Janani Janarthanan/BQ Prime) 

India's fiscal deficit widened 39.3% of the budgetary target for FY24 in the April–September period, partly cushioned by higher direct taxes even as the government front-loaded capital spending ahead of the state elections.

The fiscal deficit between April and September FY24 was Rs 7.01 crore, growing Rs 59,035 crore over the previous month, according to data from the Controller General of Accounts. The full-year budgetary estimate is Rs 17.86 lakh crore.

The fiscal deficit had reached 37.3% in the corresponding period last year.

The government increased capex ahead of the state polls. It surged to Rs 1.16 lakh crore in the month of September, the highest-ever monthly spend, reaching Rs 4.9 lakh crore or 49% of the budgetary level of Rs 10 lakh crore. The level of capex during the same period last year was 45.7%.

Key Highlights

  • Revenue receipts stood at 53.1% of budgetary estimate versus 53.1% during the same period last year.

  • Total expenditure: 47.1% vs 46.2%.

  • Revenue deficit: 26.6% vs 31.4%.

  • Capex: 49.0% vs 45.7%.

  • Net tax revenue: 49.8% vs 52.3%.

  • Non-tax revenue: 78.5% vs 58.4%, buoyed by surplus RBI dividend.

  • Spend on major subsidies: 55% vs 63%, led by nutrient-based fertiliser subsidy.

Corporate Taxes Pick Up

The government's gross tax collections increased 16% year-on-year in the first half of the fiscal as direct taxes rose in August–September, according to ICRA Ltd.'s Chief Economist Aditi Nayar.

"With a 27% rise in corporation tax collections in September 2023, amidst healthy advance tax inflows, nearly 49% of the FY24 budget estimates had been collected, which is an encouraging trend," Nayar said. "Moreover, half the personal income tax target of FY24 budget estimates had been achieved in H1 FY24."

Direct tax collections, particularly corporate taxes, recovered in August and September after lagging in the first four months of FY24.

The government collected Rs 2.12 lakh crore in corporate taxes in September alone, benefiting from the the quarter-end push amid concerns of slower tax collection.

Till September, the government collected Rs 4.51 lakh crore or 49% of the annual budgetary estimate of Rs 9.22 lakh crore.

Similarly, income tax collections reached Rs 4.51 lakh crore till September out of the annual Rs 9 lakh crore.

Fertiliser Subsidy Close To Estimate

The government spending on major subsidies, particularly on fertilisers, will be closely watched in the upcoming supplementary demand for grants.

Nutrient-based and urea fertilisers subsidies in the first half of the year reached Rs 1.10 lakh crore against the budgetary target of Rs 1.75 lakh crore for FY24.

Of this, the nutrient-based subsidy estimate is Rs 44,000 crore. In April-September, 96% or Rs 42,200 crore was spent, which may mount pressure.

The cabinet last Wednesday, approved nutrient-based subsidy rates on fertilisers for the upcoming Rabi season. This is further expected to cost an additional Rs 22,303 crore to the exchequer.

In FY23, the revised estimates for fertilisers was increased to Rs 2.25 lakh crore. Government actuals on nutrient and urea fertiliser subsidy rose to Rs 2.51 lakh crore, according to official data.