India April-August fiscal deficit at ₹6.43 lakh crore, widens to 36% of FY24 target

This was largely due to a sharp jump in capital expenditure, which was offset by lower tax devolution to state governments, and an increase in non-tax revenues, analysts said.

In the year-ago period, fiscal deficit was at ₹5.42 trillion, or 32.6% of the FY23 target of ₹16.61 trillion.

The Centre aims to bring down fiscal deficit—the difference between the government’s income and spending—to 5.9% of gross domestic product during fiscal 2024.

Capital expenditure (capex) rose to ₹3.74 trillion during April-August from ₹2.52 trillion in the same period a year ago.

Total receipts during April-August stood at ₹10.29 trillion, or 37.9% of annual estimates, of which tax receipts stood at ₹8.04 trillion, or 34.5% of annual estimates.

Corporate tax collections rose over 15% year-on-year to ₹2.39 trillion during the period under review, the data showed. Total expenditure rose to ₹16.72 trillion, or 37.1% of the annual estimates, from ₹13.90 trillion in the corresponding period in FY23.

Aditi Nayar, chief economist and head of research and outreach at rating agency Icra Ltd., said that the dip in the amount of tax devolution to states last month restricted the widening of fiscal deficit.

Nayar said while the tax devolution in August 2023 was in line with the previous month, it was lower in annual terms as a double tranche had been released in the year ago period.

“As a result, net tax revenues for the month of August 2023 stood at a healthy Rs. 2.2 trillion, a multi fold increase from the muted Rs. 0.3 trillion in August 2022,” she said.

“To meet the latter, the government has to release ₹7.1 trillion to the states in the next eight months, which is 5% lower than the amount devolved in August-March in the financial year 2023,” she added.

In May, the Reserve Bank of India (RBI) had approved a transfer of ₹874.2 billion as dividend to the government for FY23. This will likely cushion against undershooting of government’s other revenue streams (not meeting the divestment target) and overshooting of expenses (MGNREGA).

“To meet the FY2024 BE (budget estimates), the GoI (Government of India) has to release ₹6.4 trillion to the states in the next seven months, which is nearly the same as the amount devolved in Sept-March in FY2023 as per Icra’s calculations,” Nayar said, adding that this would contain the incremental fiscal deficit in some of the ensuing months.

Of the total revenue expenditure, which stood at ₹12.98 trillion during the April-August period, ₹3.7 trillion was on account of interest payments and ₹1.81 trillion went into subsidies.

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Updated: 29 Sep 2023, 05:50 PM IST