The Union government’s fiscal deficit for the April-October period came in at Rs 5.47 trillion or 36.3 per cent of the Budget estimates. In the corresponding period last year, the country’s fiscal deficit was a high 119.7 per cent. In the pre-pandemic period (April-October 2019-20), the fiscal deficit was 102.4 per cent of the Budget numbers.
The deficit stood at 6.4 per cent of GDP during the first half of the current fiscal year, a bit lower than the full year target of 6.8 per cent.
The data released by the Controller General Accounts for the April-October period showed that the reduced fiscal deficit had come on the back of a phenomenal rise in revenue receipts and a fall in both capital and revenue expenditures.
While revenue expenditures as a proportion of the Budget estimates are lower by 5.7 percentage points than the pre-pandemic level, capital expenditures are down 13.8 percentage points. In 2019-20, the government had spent 59.5 per cent of its budgeted capital expenditure by October. This year, it has only spent less than half allocated to capital expenditure (45.7 per cent).
On the revenue side, the government had collected Rs 12.8 trillion, of which Rs 12.6 trillion accrued from net tax revenue, and the rest was part of the non-debt capital receipts.
Of the Rs 12.6 trillion revenue, Rs 10.5 trillion was from tax revenues. Tax collections in October have reached 68.1 per cent of the Budget Estimates, almost double compared to last year’s Budget levels. Non-tax revenue, on the other hand, has reached 85 per cent of the budgeted amount.
The windfall gains from oil revenues have contributed to the government’s tax collection. The fiscal deficit may slip in November as the government announced a cut in road and infrastructure cess component of the excise duty on fuel in early November.
But the extension of the benefits of the free food scheme till March 2022, which is expected to cost another Rs 53,000 crore, if included in the Budget calculations, may pose a problem in terms of keeping to the Budget target.
Fiscal deficit shall also be predicated upon the government achieving its divestment target for the year.
“While revenues have been very buoyant and all targets on the revenue part (except disinvestment receipts) will be met, the question is whether the announcements on extension of free food scheme and other relief measures have been budgeted for or not. This is the only missing piece,” Madan Sabnavis, chief economist, CARE Ratings, told Business Standard.
“There is the possibility of slippage, which would still be in the region of around 1 per cent of GDP, if the additional relief expenditure is accounted for. The revenues are not that buoyant to compensate for the relief package. Also, further restrictions on the back of the Omicron variant can also affect collections,” he added.
On Tuesday, GDP numbers provided some succor as the country recorded 8.4 per cent growth in the second quarter compared to last year. A Reuters poll of 44 economists had put the year-on-year median growth at 8.4 per cent for the second quarter.