The fiscal deficit for first two months of the current fiscal reached over 12 per cent of the Budget Estimate. It is 4 percentage points higher than deficit during the corresponding period of last fiscal. Experts estimate fiscal deficit for the whole year to be higher than the Budget Estimate of 6.4 per cent for FY23.

Fiscal deficit is the difference between total expenditure and revenue of the government. It is an indication of the total borrowings that are needed by the government.

According to the data, the total receipts of the government at the end of May was ₹3.81-lakh crore, or 16.7 per cent of the BE for FY23. The collection was about 18 per cent of the BE of FY22 in the corresponding period last fiscal. In May, the tax (net) revenue was at 15.9 per cent of the BE of FY23. It was 15.1 per cent of the BE FY22 in the year-ago period. In actual terms, the net tax revenue stood at ₹3,07,589 crore during April-May.

Total expenditure

Total expenditure at the end of May stood at ₹5.85-lakh crore, or 14.8 per cent of this year’s BE. It was 13.7 per cent of the BE in the corresponding period. Among the revenue expenditure, fertiliser subsidy, especially for urea, recorded high growth. It exceeded ₹10,000 crore in two months against ₹4,829 crore in corresponding period of last fiscal. Industry sources said the government now pays ₹91.96 a kg for urea against ₹18.78 per kg last April. An increase is also seen in nutrient-based subsidy.

Aditi Nayar, Chief Economist, ICRA, said: ”We continue to maintain that Central tax devolution will overshoot the FY23 Budget Estimates, led by an expected upside in non-excise tax revenues, warranting an early reassessment of the monthly amounts being shared with the States to enable them to boost their spending and support economic growth.”

Nayar expects a large part of the higher-than-budgeted subsidies and loss related to excise duty cut to be absorbed by higher-than-estimated non-excise taxes, limiting the extent of the overshoot in the GoI’s fiscal deficit in FY23 to ₹1-lakh crore above the Budget Estimate, even if there are no expenditure savings. Moreover, “a higher nominal GDP vis-à-vis the BE is likely to contain the expected fiscal deficit at 6.5 per cent of GDP, only slightly exceeding the budgeted 6.4 per cent of GDP,” she said.

In a note,  India Ratings and Research (Ind-Ra) believes continued high inflation, leading to higher nominal GDP, is expected help the government achieve its tax collection target of FY23. The Centre has front-loaded capex in FY23, leading to 70.1 per cent y-o-y capex growth the first two months of FY23. The note prepared by Sunil Kumar Sinha and Paras Jasrai, said while cut in excise duties for petrol and diesel will have an impact on union excise collections, buoyancy in other revenues is likely to compensate for the decline in excise collections.

“No major threat to government’s fiscal deficit target even though fiscal deficit is 65.6 per cent higher than last year during the first two months of FY23,” it said.

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