Centre's fiscal deficit rises to Rs 4.51 lakh crore in April-June, 25.3% of FY24 target

Despite the sharp rise in the fiscal deficit in June, the Centre is seemingly on track to meet its fiscal deficit target for 2023-24.

The Indian government's fiscal deficit increased to Rs 4.51 lakh crore in April-June from Rs 2.10 lakh crore in April-May, according to data released by the Controller General of Accounts on July 31.

At Rs 4.51 lakh crore, the fiscal deficit for the first three months of the current financial year accounts for 25.3 percent of the full-year target of Rs 17.87 lakh crore.

The fiscal deficit in the first three months of 2022-23 was 21.2 percent of the target.

The sharp expansion in the fiscal deficit - up 28.3 percent year-on-year in April-June and 62.9 percent in June - comes after an unexpectedly-large dividend from the Reserve Bank of India (RBI) boosted non-tax revenue in May and helped limit the April-May fiscal deficit to just 11.8 percent of the full-year target.

However, in June, receipts fell and expenditure continued to mount. The Centre's total receipts in June were down 14.3 percent year-on-year, with net tax revenue down 21.5 percent at Rs 1.56 lakh crore. The Centre's tax revenue in June was hit by the transfer of a double instalment of tax devolution to states, amounting to Rs 1.18 lakh crore.

Gross tax collections, meanwhile, were up 11.3 percent in June compared to the same month last year at Rs 2.75 lakh crore. Within gross tax revenue, corporate tax collections continued to flounder, coming in at Rs 81,972 crore - down 0.4 percent from June 2022.

On the whole, in April-June, the central government's total receipts were up only 0.5 percent from the first quarter of 2022-23, with net tax revenue down 14.3 percent.

Capex climb continues

The Centre has focussed on boosting economic growth by pushing hard on capital expenditure, and the latest government finances data shows efforts continued in June.

As per the data, the Centre's capex in June jumped 62.8 percent to Rs 1.11 lakh crore, taking the total for April-June to Rs 2.78 lakh crore -  just under 28 percent of the record full-year target of Rs 10 lakh crore.

The surge in capex in June led to the Centre's total expenditure last month rising by 17.3 percent to Rs 4.25 lakh crore. For April-June, the total spending has been Rs 10.51 lakh crore, which is 10.8 percent more than what was spent in April-June 2022.

Despite the sharp rise in the fiscal deficit in June, the Centre is seemingly on track to meet its fiscal deficit target for 2023-24, with Aditi Nayar, ICRA's chief economist, commenting that fiscal concerns "appear limited".

The Centre has set itself a target of reducing its fiscal deficit to 5.9 percent of GDP in 2023-24 on its way to meeting the medium-term milestone of 4.5 percent by 2025-26.