India's April-December fiscal deficit at Rs 9.82 lakh crore, 55% of FY24 target

The release of fiscal deficit data for April-December comes a day before Finance Minister Nirmala Sitharaman tables the interim Budget for 2024-25 in Parliament, where she is expected to announce a fiscal deficit target of 5.3 percent of GDP for next year as the government looks to meet its medium-term objective of 4.5 percent by 2025-26.

While economists expect the Centre to meet its fiscal deficit target of Rs 17.87 lakh crore, there could be a minor slippage in terms of percentage of GDP.

"ICRA does not expect the fiscal deficit target of Rs 17.9 lakh crore for 2023-24 to be breached. However, a lower nominal GDP than what the Union Budget had pencilled in could result in the fiscal deficit printing at 6.0 percent of GDP," said Aditi Nayar, ICRA's Chief Economist.

The fiscal deficit in December, at Rs 75,694 crore, is more than five times what it was in December 2022. However, for April-December 2023 as a whole, the fiscal deficit was down 1 percent year-on-year.

The surge in the fiscal deficit in December was spurred by a huge increase in capital expenditure, which more than doubled year-on-year to Rs 87,985 crore, taking the total for year to Rs 6.74 lakh crore. The pick-up in capex is encouraging after it had slowed down in recent months, leading to economists predicting that the Centre may miss its record target of Rs 10 lakh crore for 2023-24.

According to a Moneycontrol poll of 15 economists, the government may revise down its capex for the current financial year by around Rs 30,000 crore to Rs 9.7 lakh crore.

The sharp increase in capex in December was responsible for pushing up the government's total expenditure last month by seven percent to Rs 4.02 lakh crore. For April-December, the Centre's spending amounts to Rs 30.54 lakh crore, or 67.8 percent of the full-year target, and is up 8.4 percent compared to the first nine months of 2022-23.

On the income side, total receipts were down 9.5 percent year-on-year in December at Rs 3.26 lakh crore, with net tax revenue 11.1 percent lower even as gross tax revenue rose nearly 13 percent on the back of a 15 percent rise in corporate tax collections and 24 percent jump in the income tax mop-up. The Centre's receipts fell in December even though gross tax collections were up due to the central government releasing an additional instalment of tax devolution to states during the month.

For April-December, the government's total receipts were up 13.5 percent at Rs 20.72 lakh crore. While tax collections have been robust, non-tax revenue crossed the Budget estimate of Rs 3.02 lakh crore in December, standing at Rs 3.12 lakh crore so far this year, largely thanks to the huge surplus transferred by the Reserve Bank of India (RBI) in May.