Fiscal deficit improves to 6.7% in FY22 on higher tax mop up

Fiscal deficit improved to 6.71% of the FY22 GDP over the revised budget estimate of 6.9% per cent mainly on account of higher tax realisation.

Unveiling the revenue-expenditure data of the Union government, the Controller General of Accounts (CGA) said that the fiscal deficit in absolute terms was ₹15,86,537 crore (provisional). The Finance Ministry in February had estimated the deficit at ₹15,91,089 crore or 6.9% of GDP.

Tax receipts during the fiscal were at ₹18.2 lakh crore as against the revised estimates (RE) of ₹17.65 lakh crore, the data showed. Total expenditure too was higher at ₹37.94 lakh crore against the RE of ₹37.7 lakh crore presented to Parliament on February 1, 2021. The CGA further said the revenue deficit at the end of the fiscal was 4.37% for FY22.

In another set of data, the CGA said the fiscal deficit during the first month of FY23 was 4.5% of the Budget Estimate for the current fiscal. The deficit was 5.2% a year earlier. The government said it expected the fiscal deficit for the current financial year at 6.4% of GDP, or ₹16.61 lakh crore.

In April 2022, there was a revenue surplus of ₹591 crore. Government meets its fiscal deficit from market borrowings.

Revenue collections were about ₹27 lakh crore, almost ₹5 lakh crore above the budget estimates, said Vivek Jalan, Partner, Tax Connect Advisory.

There was a growth of about 35% over the last year’s revenue collection, led by growth of about 50% in direct taxes and supported by about 20% growth in indirect taxes, he said.

“The spurt in tax revenues, especially GST collection, was mainly a result of DGARM, which is the Data Analytics wing of the GST Council,” Mr. Jalan said.

Aditi Nayar, Chief Economist, ICRA said the provisional data indicated that the fiscal deficit of the Centre was contained marginally below the FY22 revised estimate, benefitting from the higher tax and non-tax revenue receipts and lower capital spending, which absorbed the deficit in non-debt capital receipts and higher revenue expenditure.

On the outlook for FY23, she said there were several risks to the fiscal deficit target of ₹16.6 lakh crore, emanating from the revenue loss to the Centre on account of the excise duty cut, lower-than-budgeted transfer of the RBI’s surplus, and the need for additional spending on food, fertilizer and LPG subsidies through the year.

For the last financial year, the government had initially pegged the fiscal deficit at 6.8% of GDP in the Budget presented in February 2021.

The government, in the revised estimates in the Budget for FY23, had forecast a higher fiscal deficit of 6.9% of the GDP or ₹15,91,089 crore for the fiscal ended in March.