The Centre's fiscal deficit for April-August came in at Rs 4.7 lakh crore, or 31 percent of the full-year budget estimate, compared with 109 percent for the same period last year, official data showed on September 30.
This was primarily on the back of strong direct and indirect tax revenue collections, compared to the same period last year, when tax collections were badly hit due to the April-June 2020 nationwide lockdown. There has also been an expenditure compression so far this year, analysts say.
In April-August last year, fiscal deficit had already crossed the budgeted target. Fiscal deficit is the difference between a Centre or state's expenditure and revenue when the former is higher.
Finance Minister Nirmala Sitharaman had budgeted a fiscal deficit target of Rs 15.07 lakh crore, or 6.8 percent of nominal gross domestic product, for FY22. The fiscal deficit for FY21 was revised to Rs 18.49 lakh crore, or 9.5 percent of GDP, from a budget target of 7.96 lakh crore, or 3.5 percent of GDP.
For April-August 2021-22, net tax revenue came in at Rs 6.45 lakh crore, or 41.7 percent of budget estimates (BE) compared with 17.4 percent for the same period last year.
"The healthy expansion in the Centre's tax revenues augurs that the upturn will sustain in the second half as well, even though a normalising base may dampen the pace of growth going forward. We expect the Centre's gross tax revenues to exceed the BE by at least Rs 2 lakh crore," said Aditi Nayar, Chief Economist with ICRA Ltd.
Non-Tax revenue for April-August came in at Rs 1.49 lakh crore, or 61.2 percent of BE, compared with 22.4 percent for the same period last year. This is primarily due to Rs 99,122 crore surplus that the Reserve Bank of India transferred to the Centre in May.
In absolute terms, the total expenditure for April-August was Rs 12.76 lakh crore, compared with Rs 12.47 lakh crore for the same period last year. As a percentage of BE, it was 36.7 percent compared with 40 percent.
Revenue expenditure was Rs 11.05 lakh crore compared with Rs 11.13 lakh crore, while capital expenditure was Rs 1.72 lakh crore versus Rs 1.34 lakh crore.
"Total revenue expenditure is just 37 percent of the budget amount mainly due to the curbs that were placed by the government. We may expect this to increase in the second half as the government has asked ministries to spend their budgets," said Madan Sabnavis, Chief Economist with Care Ratings.
Nayar said that the expenditure compression suggests that government final consumption expenditure may weigh upon the GDP growth in Q2 FY2022.
"With all ministries now permitted to spend as per their own approved budget, we anticipate that spending will gather pace in the second half of this year," Nayar said.
The Centre's fiscal deficit in FY2022 is likely to be lower than budgeted, the extent of which will be driven by the size of the disinvestment inflows that are eventually realised," she said.
As Moneycontrol reported earlier, senior economic policymakers are confident of meeting the fiscal deficit target for the year, encouraged by strong tax revenue and a broad-based recovery across most sectors following the second wave of Covid-19.
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