India's April-September Fiscal Deficit At 35% Of Budget Estimate

Government accounts data for April-September shows strong revenue, a pick-up in spending.

Pallavi Nahata @PallaviNahata

30 Oct 2021, 10:30 AM IST

<div class="paragraphs"><p>Police barricades near the South Block of the Central Secretariat buildings, left, which houses the Prime Minister's Office and the Ministries of Defence and External Affairs, and the North Block, right, March 26, 2021. Photographer: Prashanth Vishwanathan/Bloomberg</p></div>

Police barricades near the South Block of the Central Secretariat buildings, left, which houses the Prime Minister's Office and the Ministries of Defence and External Affairs, and the North Block, right, March 26, 2021. Photographer: Prashanth Vishwanathan/Bloomberg

The central government's finances continue to benefit from improved tax revenues, while expenditure too picked up.

The fiscal deficit for the April-September period stood at Rs 5.27 lakh crore or 35% of the budget estimate, according to data from the Controller General of Accounts. In the year-ago period, the government's fiscal deficit had surpassed budget estimates.

With a near-doubling of revenues outpacing the 10% rise in expenditure, the government's fiscal deficit compressed to Rs 5.3 lakh crore in first half FY22 from Rs 9.1 lakh crore a year earlier, and remained lower than the Rs 6.5 lakh crore in the pre-Covid period of April-September 2020, Aditi Nayar, chief economist at ICRA Ltd., said.

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The central government had budgeted for a fiscal deficit of 6.8% of GDP for FY22. But the government may seek to narrow that budget gap target to 6.3% of GDP, Bloomberg reported last month.

Net tax revenue continued to pick up. Revenue receipts for the April-September period stood at Rs 10.8 lakh crore or 60.4% of budget estimate. This is much higher than the 27.3% of budget estimate collected during this period a year ago.

Net tax revenue in the first six months of the fiscal stood at Rs 9.2 lakh crore or 59.6% of the budget estimate, compared to 28% last financial year.

Despite a waning of the favourable base, the government's gross tax revenues recorded a substantial 50% growth in September 2021, benefitting from robust advance taxes amid a formalisation of the economy, Nayar said.

With the corporation tax, central GST, customs and excise duty collections exceeding 50% of the budget estimate in the first half, and the likelihood that rising vaccinations will boost confidence and spending in second half, gross tax revenues are expected to exceed the budget estimate by at least Rs 2 lakh crore for the current financial year, according to her estimates. The higher-than-budgeted surplus transfer by the RBI to the anticipated extra net tax revenues, revenue receipts, net of devolution to states, are estimated to exceed the FY22 budget estimate by a considerable Rs 1.9 lakh crore, she said.

Expenditure picked up in September, after the government removed curbs on ministries because of an improvement in revenue.

Total expenditure stood at Rs 16.3 lakh crore or 46.7% of budget estimate. In the year-ago period, the government had spent 48.6% of its budgeted expenditure.

Capital expenditure in April-September was at Rs 2.3 lakh crore or 41.4% of budget estimates, compared to 40.3% in the same period an year ago
Revenue expenditure stood at Rs 13.4 lakh crore or 47.7% compared to 49.9% until September in the last financial year.

Encouragingly, the government's total expenditure surged 51% in the month of September 2021, and the healthy 21.2% expansion in second quarter of FY22 is expected to support the pace of GDP growth in that quarter, Nayar said.