Spending curbs during elections during the first quarter and good growth in tax collection helped the Centre limit fiscal deficit to just 29 per cent of the Budget Estimate during the first six months (April-September) of the current fiscal, data from Controller General of Accounts (CGA) showed on Wednesday.
The Budget presented in July pegged fiscal deficit for the whole fiscal at ₹16.13 lakh crore or 4.9 per cent of GDP. Experts feel that with the latest trend, final deficit number could be lower than the Budget Estimate. It is also estimated that capital expenditure for the full fiscal is likely to be revised lower which will help in keeping the deficit lower than the estimate. It may be noted that six-month data are used for calculating revised estimate.
Meanwhile, CGA data showed that net tax receipts for the first six months of the current financial year were ₹12.65 lakh crore, or 49 per cent of the annual target. Total government expenditure during the period was ₹21.1 lakh crore, or about 44 per cent of the annual goal. The government’s spending has been lower due to general elections. For the first six months, the government’s capital expenditure or spending on building physical infrastructure was ₹4.15 lakh crore or 37 per cent of the annual target.
Commenting on the number, Aditi Nayar, Chief Economist with ICRA, said decline in deficit was aided by the RBI’s dividend payment in the early part of the fiscal along with continuing YoY contraction in the capital expenditure. After the lackluster first quarter amidst the Lok Sabha polls, the Centre’s capex expanded sharply in July but the momentum didn’t sustain in the subsequent two months.
Capex rises
Overall, capex rose by 10.3 per cent in July-September quarter, which should support economic growth in that quarter. “To meet the FY2025 BE, the GoI needs to incur a capex of ₹ 1.16 lakh crore per month during October-March (H2 FY2025), which entails a considerable expansion of 52 per cent relative to H2 FY2024. This appears rather challenging, at this juncture and we expect the capex target of ₹11.1 lakh crore for FY2025 to be missed by a margin of at least ₹0.5 lakh crore,” she said.
Gross tax collections expanded by 12 per cent in September. While corporate tax collections have been tepid, rising by just 2 per cent, income tax collections have expanded by a robust 25 per cent during this period although these trends may have been partly distorted by the timing of refunds.
“ICRA believes that income tax collections may surpass the FY2025 RBE (Revised Budget Estimate) of ₹11.5 lakh crore, unless large refunds are released in the latter part of the fiscal, while corporation tax inflows may print in line or slightly lower than the target,” Nayar said.