India's April-August Fiscal Deficit Broadens to Rs 6.43 Lakh Crore, Tax Collections Soar
The Indian government”s fiscal deficit broadened to Rs 6.43 lakh crore in April-August, up from Rs 6.06 lakh crore in the April-July period, according to data released by the Controller General of Accounts on September 29.
At Rs 6.43 lakh crore, the fiscal deficit for the first five months of the current financial year constitutes 36.0% of the budget target, which is Rs 17.87 lakh crore. During April-August 2022, the fiscal deficit accounted for 32.6% of the target set for 2022-23.
In August, the Centre”s fiscal deficit was a mere Rs 37,233 crore, marking a significant 81% decline compared to the corresponding month of the previous year.
This reduction was primarily attributed to a substantial four-fold increase in total receipts, amounting to Rs 2.54 lakh crore. Meanwhile, net tax revenues showed an impressive surge of over six-and-a-half times, reaching Rs 2.21 lakh crore.
The remarkable year-on-year growth in net tax revenues during August can be attributed to two factors: higher tax collections and lower tax devolution to states.
On the revenue front, corporate tax collections experienced a significant resurgence, surging by over five times from August 2022 to Rs 62,817 crore. This amount represents the second-highest monthly collection thus far in the fiscal year 2023-24.
Simultaneously, income tax collections more than quadrupled, reaching Rs 1.03 lakh crore. In total, gross tax collections in August amounted to Rs 2.95 lakh crore, nearly twice as high as the corresponding month last year.
Despite the substantial increase in tax collections, the fiscal deficit in August was effectively managed through a smaller tax devolution to states, amounting to Rs 72,961 crore.
In August 2022, the Centre had transferred Rs 1.17 lakh crore. However, the amount transferred to states thus far in the current financial year is higher at Rs 3.82 lakh crore.
It is important to note that transfers to states reduce the Centre”s net tax collections.
Overall, during April-August, the Centre”s total receipts witnessed a 21% increase, amounting to Rs 10.29 lakh crore. Corporate tax collections rose by 15%, while income tax collections surged by 36% compared to the same period in 2022.
Non-tax revenue remained robust, experiencing a significant 79% year-on-year growth and reaching Rs 2.10 lakh crore. This growth was primarily driven by the larger-than-expected dividend transferred by the Reserve Bank of India (RBI) in May.
While the government”s revenue soared in August, total expenditure increased at a more sedate pace of 11%. However, capital expenditure witnessed a substantial rise of 30%, amounting to Rs 56,720 crore.
For April-August, the Centre”s capital expenditure (capex) was 48% higher, reaching Rs 3.74 lakh crore. Consequently, total spending increased by 20%, totaling Rs 16.72 lakh crore.
The latest set of numbers supports the government”s confidence in achieving this year”s fiscal deficit target of 5.9% of GDP.
“Overall, we see limited fiscal concerns at this stage, as corroborated by the unchanged market borrowing numbers for October 2023-March 2024 relative to the amount indicated in the budget estimates,” Moneycontrol reported, quoting Aditi Nayar, ICRA”s chief economist.
On September 27, the finance ministry announced that the government would borrow Rs 6.55 lakh crore in the second half of 2023-24, aligning with the first-half borrowing calendar issued in late March.
