April-July Fiscal Deficit At About A Fifth Of Budget Estimate

The central government’s finances continue to look steady and much improved compared to a year ago, according to data released by the Comptroller General of Accounts on Tuesday.

The fiscal deficit for the April-July period stood at Rs 3.2 lakh crore. This is just 21.3% of the budget estimate for the year. For the comparable period a year ago, the fiscal deficit stood at 103.1%.

Even in pre-pandemic years, the fiscal deficit as a percentage of budget estimate in the April-July period was much above the current year’s levels.

Revenue deficit for this period was also much lower at 18.1% of the budget estimate compared with 117.3% a year earlier.

The government’s fiscal situation is benefitting from both stronger-than-expected tax receipts and non-tax receipts.

Overall revenue receipts in the April-July period stood at Rs 6.69 lakh crore. This is 37.4% of the budget estimate compared with the 11.3% raised in the same period a year ago.

Net tax revenue in the first four months of the year stood at Rs 5.29 lakh crore, or 34.2% of the budget estimate. A year earlier, in these months, the government had raised just 12.4% of the budget estimate. The share of collections in the April-July period this year is also higher than pre-pandemic years.

The same is the case with non-tax revenue. At Rs 1.4 lakh crore, this segment of revenue, which includes the larger-than-expected dividend from the Reserve Bank of India, is at 57.6% of the budget estimate. This, despite relatively tepid disinvestment proceeds so far.

A year ago, in the April-July period, non-tax revenue was at 6.4% of the budget estimate.

Excise collections, a category which has been in focus due to the high levies on fuel products, continue to yield buoyant revenue for the government.

In the April-July period, the government collected Rs 1 lakh crore from this category compared with Rs 67,895 crore in the same period a year ago.

Corporation and income tax collections are also running well above last year and higher than the previous year too.

Collections of corporation tax were 65% above the pre-pandemic year. Income tax collections were 26% higher than the year before last.

The government had announced a corporate tax cut in September 2019.

While revenue receipts have been above previous years, spending has been relatively lower.

Total expenditure in the April-July period stood at 28.8% of the budget estimate compared with 34.7% in the same period a year ago.

Revenue expenditure stood at 29.9% during this period versus 35.8% a year ago. Capital expenditure stood at 23.2% compared with 27.1% in the year earlier.

A sharp increase in revenue and contractionary non-interest revenue expenditure has resulted in a fiscal deficit, which is lowest in the last nine years, said Devendra Pant, chief economist at India Ratings & Research. India Ratings expects the FY22 fiscal deficit to be lower than the budget estimate at 6.6% of GDP.

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