Tax Mop-up Brings Fiscal Deficit Down to 31% of BE

Helped by buoyant tax revenue, the Centre’s finance continued to look heathy with the fiscal deficit at Rs. 4.68 lakh crores, or 31.1% of the budget estimate, at the end of the first five months if the current financial year, government data showed Thursday.

The government’s financial position has vastly improved from the pandemic-hit fiscal 2021, when the fiscal deficit was Rs 8.7 lakh crores, or 109.3% of the budget estimate, during the April-August period.

The net tax revenue for the first five months was Rs. 6.45 lakh crores, compared with Rs. 2.84 lakh crores for the same period last year.

Experts, however, remain divided on whether the government will meet its fiscal deficit target of Rs.15.1 Lakh Crores, or 6.8% of GDP, for FY22.

CARE Ratings Chief economist Madan Sabnavis has projected the fiscal deficit to slip to 7.65-7.72% of GDP, up to 1.0 percentage point wider than the budget estimate, assuming no change in nominal GDP.

ICRA, on the other hand, sees it narrower than the budget target. But Aditi Nayar, the ratings firm’s chief economist, said the extent of the deficit would be driven by the amount of disinvestment inflows eventually realized.

The Centre’s total expenditure stood at Rs 12.76 lakh crores, or 36.7% of the budget estimate for FY22.

Capital expenditure in the period was Rs.1.72 lakh crores, or 31% of budget estimates, while revenue expenditure stood at Rs.11.04 lakh crores, or 37.7% of the estimate for the fiscal year.

Both capital and revenue spending picked up in August, indicating that the government’s spending push had begun to show some results. The April-August capital spending was 27.8% higher from a year earlier.

With all ministries now permitted to spend as per their own approved budget, spending is expected to gather pace in the second half of this year, Nayar said. S-ET

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