Budget 2022 | FM pegs fiscal deficit at 6.4% of GDP for FY23

Finance Minister NIrmala Sitharaman

Finance minister Nirmala Sitharaman on February 1 pegged the government’s fiscal deficit for the financial year 2022-23 at 6.4% of gross domestic product (GDP) as the budget recognised the need to boost growth .

The Union government’s fiscal deficit was down 35.3 percent year-on-year at Rs 6.96 lakh crore in April-November 2021 period, accounting for 46.2 percent of the Budget estimate for the current financial year, as tax collections remained robust and spending muted.

The Budget for 2021-22 pegged the fiscal deficit for the full year at Rs 15.07 lakh crore, or 6.8 percent of GDP, which has been revised to 6.9 percent.

The budget has proposed a fiscal deficit of 4.5% of GDP by 2025-26. A fiscal deficit of 4% of GSDP will be allowed for states in 2022-23. Revenue deficit is seen at 3.8% of GDP in 2022-23.

Data released on December 31 by the Controller General of Accounts continued to show the Centre's finances in good light, with total receipts up 66.0 percent in April-November, on the back of robust tax collections.

Total expenditure, meanwhile, was up only 8.8 percent over the same period.

However, November 2021 saw some deterioration in the central government's finances, with total receipts down 19.0 percent year-on-year even as spending edged up by 1.2 percent.

Consequently, the fiscal deficit for the month was 21.4 percent higher at Rs 1.49 lakh crore, compared to November 2020.

While the Centre has looked to keep spending to boost the economy, the resumption of economic activity following the relaxation of the pandemic-enforced restrictions has spurred tax revenues and helped fill its coffers.

Gross tax revenue in April-November 2021 was up 50.3 percent from the corresponding period last year, with November 2021 seeing an 18.2 percent rise to Rs 1.78 lakh crore.

The cut in excise duty on petrol and diesel, announced in early November 2021, did not seem to have any impact as the Centre's excise duty collections for the month rose Rs 37,867 crore from Rs 32,379 crore in October 2021.