New Delhi, January 10

The Government is expected to meet its fiscal deficit target of 6.4 per cent of GDP or Rs 16.6 lakh crore for Fiscal Year 2022-23 (FY23) despite a surge in expenditure, India Ratings & Research (Ind-Ra) said on Tuesday.

Fiscal deficit refers to the condition when expenditure is higher than revenue. “Higher tax collections driven by higher-than-budgeted nominal GDP (Gross Domestic Product) growth in FY23” is expected to help in meeting the deficit target, said the agency.

Last Friday, the National Statistical Office estimated the nominal GDP (total value of goods & services factoring present inflation) at Rs 273.08 lakh crore, as against Rs 258 lakh crore projected in the Budget

The agency said finances during April-November of FY23 appear to be in a much better position than in the corresponding period of the last fiscal, powered by an encouraging and resilient recovery. During this period, gross tax revenue grew at a robust pace of 15.5 per cent, much higher than the budgeted growth of 9.6 per cent.

“Ind-Ra estimates that gross tax collections for FY23 would grow 14.7 per cent yoy to Rs 31.06 lakh crore, higher than the budgeted Rs 27.62 lakh crore, on account of a substantial improvement in direct taxes collections,” it said.

While direct tax collections are pegged to grow 20.7 per cent yoy due to the steep growth in corporate (18 per cent) and income tax (23.5 per cent), indirect taxes are projected to increase 8.4 per cent yoy. As a result, “the share of direct taxes in gross tax revenue collections is projected to increase to a four-year high of 53.8 per cent in FY23,” it added.

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Higher expenditure

Concomitantly, Ind-Ra expects expenditure to be higher than what was budgeted for FY23. The first supplementary demand for grants placed by the Centreprojects that revenue expenditure would inflate by Rs 2.95 lakh crore on account of a ballooning of the subsidy bill. Major subsidies (food, fertilisers and petroleum) would increase by Rs 1.97 lakh crore in FY23. The extension of the Pradhan Mantri Gareeb Kalyan Ann Yojana until end-December 2022 and a steep rise in world prices of fertilisers have led to an increase in food and fertiliser subsidies. “Capital expenditure would increase by over Rs 31,000 crore in FY23, led by increased expenditure on railway and road projects.

The agency forecasts the revenue and fiscal deficit to come in at Rs 10.58 lakh crore and Rs 17.61 lakh crore in FY23, which would be higher than the budgeted Rs 9.9 lakh crore and Rs 16.61 lakh crore, respectively. However, the higher-than-budgeted nominal GDP (as per the first advanced estimates (FAE) of the National Statistical Organisation (NSO) is expected to grow 15.4 per cent yoy) would help in meeting the budgeted target for revenue and fiscal deficit at 3.8 per cent and 6.4 per cent of GDP, respectively, in FY23.

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