 "Tax collections")
Robust tax collections -- both from direct taxes and goods and services tax (GST) -- are expected to give the Centre leeway in reining in fiscal deficit at the targeted 6.4 per cent of FY23 GDP despite rising fertiliser and food subsidy, and likely decline in union excise duty mop up.
The government has so far collected Rs 13.49 trillion if the latest numbers of direct tax collections till October 8, central GST figures till September and customs and union excise duty figures till August are taken into consideration.
This constitutes 48.9 per cent of the Budgeted figure of Rs 27.58 trillion for the current financial year.
If devolution to the states in September is taken the same as was given in July at Rs 58,333 crore -- the government would give Rs 3.76 trillion to the states in the first half. In August, the government had doubled the devolution to Rs 1.17 trillion compared to July.
If this devolution is taken out, the Centre's net tax revenues would be Rs 9.73 trillion--in a bit over the first half without considering customs and excise collections for September. This would be 50.28 per cent of the Budgeted amount of Rs 19.35 trillion.
This means that the government has already collected half the targeted revenue in the first six months of the current financial year even as customs and excise duty collection figures are yet to come in the public domain. Most of the tax revenues come in the second half due to the festival season and last month's rush in paying taxes in March. For instance, 16 per cent of total tax revenues (pre-devolution) came in March during 2021-22.
Anyway, the government was too conservative in estimating tax figures in the Budget for 2022-23. The Budget projected just 1.8 per cent growth in tax collections, at Rs 2.76 trillion, in FY23 over the actual collections of Rs 2.71 trillion in FY22.
While tax revenues have been robust, there would be extra expenditure in subsidies on two fronts--food and fertilisers. Besides, cutting excise duty on fuels would also reduce tax numbers.
The exchequer could take a hit of Rs 44,762 crore with the extension of the free food scheme by three months till this December. This extension, along with the earlier ones, would cost the government Rs 1.30 trillion.
However, according to some reports, based on rough estimates, there could be a saving of about Rs 70,000 crore from lower wheat procurement. So, the exchequer could take a hit of Rs 60,000 crore on net basis.
Besides, there could be additional expenditure of Rs 1.45 trillion on fertilisers. But this calculation was made before the sharp drop in prices since August. Gas prices are stabilising as well.
So, broadly speaking, there could be extra expenditure of a bit over Rs 2 trillion on food and fertiliser subsidies, which could reduce if commodity prices continue to fall globally.
A cut in excise duties on petroleum and diesel, though, would cost the exchequer Rs 85,000 crore. This would be partly met by the imposition of windfall taxes on fuels.
Besides, the government has garnered only Rs 24,500 crore from disinvestment so far, against the full-year goal of Rs 65,000 crore. However, if the IDBI Bank strategic sale goes through, the government may meet the target.
Also, the government has garnered only Rs 1.16 trillion from non-tax revenues, which is 43 per cent of BE of Rs 2.70 trillion.
So, broadly there is a gap of over Rs two trillion over subsidy bill and decline in excise duties.
However, the increase could be much more from tax revenues.
Icra chief economist Aditi Nayar said,"We expect the non-excise gross tax revenues of the government to exceed the conservatively estimated FY23 BE by a sharp Rs 3-3.5 trillion."
She said this will help absorb a large part of the expenditure overshoot on fertiliser and food subsidies, as well as the shortfall in excise duty.
However, with a modest pace of inflows of non-tax revenues and disinvestment receipts, some expenditure savings will have to be found to supplement the expected efficiency generated by the SNA (System of National Accounts).
"Overall, we expect the fiscal deficit to be broadly limited to the budgeted 6.4 per cent of GDP, on the updated estimates of nominal GDP," she said.
The Budget has assumed nominal GDP to grow 11.1 per cent to Rs 258 trillion for FY23 from the first advance estimate of Rs 232 trillion for FY22. However, GDP came at Rs 236.6 trillion for FY22. This means the Budget has assumed just nine per cent growth for FY23. This is too conservative. Even if the economy at constant prices grows by RBI's expectations of seven per cent this year, the nominal growth could well be around 14 per cent.
Any higher economy's size in nominal terms would make even a higher fiscal deficit in absolute numbers look smaller as per cent of GDP.
