The central government's fiscal deficit for April-December 2022 widened to 59.8% of its target for the full fiscal.
In actual terms, the government incurred a fiscal deficit of Rs 9.92 lakh crore, against its annual budgeted figure of Rs 16.6 lakh crore in the first nine months of the year, according to data released by the Controller General of Accounts.
Although the government is expected to breach its fiscal deficit in actual terms, the fiscal deficit as a percentage of the GDP is likely to remain at 6.4%.
According to ICRA's Chief Economist Aditi Nayar, "With a typical surge in receipts in the last quarter and a cushion provided by an assessed YoY decline in tax devolution, we expect the overshoot in the GoI's fiscal deficit to be limited to Rs 0.8 trillion (Rs 80,000 crore) relative to the FY23 BE, with the target of 6.4% of GDP likely to be met."
The increase in the fiscal deficit on a YoY basis has jumped from Rs 7.59 lakh crore (50.4% of target) in FY22 to Rs 9.92 lakh crore (59.8% of target) in FY23.
But a monthly observation in comparison to November 2022 indicates that the actual monthly spike in fiscal deficit has been much lesser than previous months at Rs 14,822 crore.
The growth in the gross tax revenue stood at a marginal 0.8% in December 2022, dampened by personal income tax and excise duty, said Nayar.
ICRA estimates that the amount that remains to be disbursed to the states in the last quarter will be around Rs 1 lakh crore, lower than the transfer of Rs 4.3 lakh crore in Q4 FY22, offering a cushion in the remainder of this year.
Key Highlights
Capital expenditure was 65.4% at Rs 4.89 lakh crore, compared to 70.7% a year earlier.
Total expenditure is at Rs 28.18 lakh crore, or 71.4% of target, closer to last year's 72.4% for the same period last year.
Revenue receipts stood at Rs 17.69 lakh crore, or 80.3% of the budgeted figure, compared to 96.9% last year.
Of this, net tax revenue stood at Rs 15.55 lakh crore, which is 80.4% of the expected target, compared to 95.4% last year.
Non-tax revenue stood at Rs 2.14 lakh crore, amounting to 79.5% of the budget estimate, compared to 106.7% in the previous financial year.
Net tax receipts have reached 80% of the target, in line with the economists' view that the year's tax receipts will overshoot budgeted levels on account of direct taxes and GST inflows.
On the expenditure front, Nayar expects a modest YoY rise of 7% in total spending in Q4 FY23.
"We estimate the total spending in the current fiscal to exceed the Budget Estimate (BE) by Rs 2.3 lakh crore, lower than the net cash outgo announced in the first supplementary demand for grants of Rs 3.3 lakh crore, after taking into account our expectations of expenditure savings by ministries/departments," she said.
All Eyes On States To Meet Budgeted Capex Target
India's capital expenditure target for FY23 is Rs 7.5 lakh crore, which is 35% higher than the previous year's target. And so far, the central government has met 65.4% of that target, or Rs 4.8 lakh crore in actual terms.
Monthly capex has reached Rs. 42,831 crore in December 2022, up from Rs 38,099 crore in November 2022. Nayar said that it paled in comparison to the outlay of Rs 1.2 lakh crore in December 2021, which had been boosted by the equity infusion into Air India.
"The balance capital spending needed to meet the FY23 BE is 29% higher than the actual capex incurred in Q4 FY22. A pickup in the states' offtake of the interest-free capex loan scheme in Q4 FY23 will be crucial to ensure that the budgeted target is met," she said.
The interest-free capex loan to states relates to the Rs 1 lakh crore that has been dedicated to states as ‘Special Assistance to States for Capital Investment 2022–2023'.
The break up of it is as follows:
Part 1: Capital Expenditure of Rs 80,000 crore.
Part 2: PM GATI Shakti Related Expenditure of Rs 5,000 crore.
Part 3: PMGSY (PM Gram Sadak Yojana) of Rs 4,000 crore.
Part 4: Incentives for digitization of Rs 2,000 crore.
Part 5: Optical Fibre Cable of Rs 3,000 crore.
Part 6: Urban Reforms of Rs 6,000 crore.
Additionally, over and above the different parts of the scheme, the central government is also offering Rs 5,000 crore for 'Disinvestment and Monetization' and Rs 2,000 crore is earmarked towards scrapping old vehicles.
So far, states have claimed Rs 77,109 crore and the central government has released Rs 41,11 crore, according to a recent report by the Department of Expenditure.
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