India Ratings & Research (Ind-Ra) has estimated Centre’s fiscal deficit for current fiscal (2021-22 or FY 22) 20 basis points lower than budgeted number of 6.8 per cent.
100 basis points mean one percent. Fiscal Deficit means expenditure is higher than revenue. Revised deficit number for FY 22 will be made public on February 1 next year, when Finance Minister Nirmala Sitharaman will present Union Budget for next fiscal year.
“Higher tax and non-tax revenue collections this fiscal are expected to more than offset the shortfall in disinvestment revenue, leading to the fiscal deficit coming in at 6.6 per cent of GDP in FY22, 20bp lower than budgeted,” Ind-Ra said in a research paper authored by Sunil Kumar Sinha (Principal Economist), Devendra Kumar Pant (Chief Economist ) and Paras Jasrai (Analyst).
As tax collection has been better and expenditure is low, many of rating agencies and economic research firms believe fiscal deficit to be lower than estimated. In the current fiscal, the government estimated deficit of over ₹15 lakh crore. During April-October period, the deficit has been 36.3 per cent of the estimate.
The research note further said that the data relating to the union government finances show that tax collections so far have immensely benefitted both from growth and inflation. While the GDP growth is benefitting due to the lower base of last year, higher inflation (GDP deflator) has led to the economy registering higher nominal GDP growth and thus helping higher tax collections.
“The GDP deflator growth in 1QFY22 (April-June) was highest at 9.7 per cent and second highest at 8.4 per cent in 2QFY22 (July-September) in the quarterly series of 2011-12 base. As a result, the nominal GDP growth came in 31.7 per cent in 1QFY22 and 17.5% in 2QFY22,” the note said.
Ind-Ra estimates the gross tax revenue collection in FY22 to be ₹5.9 lakh crore higher than the budgeted figure, with the share of corporation tax being 28.4 per cent, income tax 16.3 per cent, GST 14.7 per cent, custom duty 14.2 per cent, excise duty 22.4 per cent and others 3.9 per cent. As a result, “the share of direct tax in the expected additional gross tax revenue collection works out to be 44.7 per cent and that of indirect tax 55.3 per cent. On the whole, the share of direct taxes in the gross tax revenue of FY22 is expected to increase to 48.9 per cent in FY22 from 45.8 per cent in FY21,” it said.
Like tax revenue, even the non-tax revenue is expected to come in higher than the budgeted figure in FY22. Non-tax revenue is forecasted to reach ₹3.1 lakh crore in FY22 as against the budgeted ₹2.4 lakh crore Non-tax revenue collections of ₹2.1 lakh crore during April-October grew at 78 per cent and and were 85.1 per cent of the FY22 budgeted amount, it said.