Centre's FY22 fiscal deficit at 6.7% vs revised estimates of 6.9%

April saw revenue surplus of Rs 591 crore

The Union government’s fiscal deficit for FY22 came in at Rs 15.86 trillion, or 99.7 per cent of the Revised Estimates (RE) of 15.91 trillion, on the back of higher tax revenues and contained capital expenditure, data released by the Controller General of Accounts (CGA) showed on Tuesday.

As a percentage of GDP, fiscal deficit stood at 6.7 per cent compared with RE of 6.9 per cent.

The CGA also released figures for April, the first month of FY23. Fiscal deficit for the month stood at Rs 74,846 crore, or 7 per cent of the FY23 Budget Estimate (BE) of Rs 16.6 trillion, compared with 6.5 per cent for the year-ago period. There was a slight revenue surplus of Rs 591 crore in April.

“The provisional data indicates that the fiscal deficit of the Centre was contained marginally below the RE, benefitting from higher tax and non-tax revenue receipts and lower capital spending, which absorbed the deficit in non-debt capital receipts and higher revenue expenditure,” said Aditi Nayar, chief economist at ICRA.

For FY22, net tax revenue came in at Rs 18.2 trillion or 103 per cent of RE compared with 106 per cent for the same period last year. Non-tax revenues were Rs 3.48 trillion, or nearly 111 per cent compared with 98.6 per cent for the year-ago period, while non-debt capital receipts were 39.2 per cent of RE, owing to poor showing on the divestment front.

Revenue expenditure for the year was Rs 32 trillion, higher than the RE of Rs 31.7 trillion, while there was a squeeze in capital expenditure, which came in at Rs 5.92 trillion versus RE of Rs 6 trillion.

The revenue deficit for FY22 was also contained at Rs 10.3 trillion, or 94.8% of RE of Rs 10.9 trillion.

For April 2022, the Centre’s capital expenditure rose 68 per cent compared to the same period last year.

Looking ahead, Sunil Kumar Sinha, principal economist at India Ratings, said higher inflation was going to be a drag on household consumption, but would lead to higher tax collections due to higher nominal GDP. “However, the headwinds from the Ukraine-Russia conflict will cast shadow on FY23 budgeted expenditure by putting pressure on subsidy and other income support measures of the government,” he said.
 

Nayar of ICRA said there were several risks to the FY23 fiscal deficit target, 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.

She, however, said a large part of this would be offset by appreciably higher than budgeted taxes, limiting the extent of the overshoot in the Centre’s fiscal deficit in FY23 to Rs 1 trillion above the Budget Estimate.

“In our view, the rise in global interest rates, domestic monetary tightening, and the renewed uptick in crude oil prices will lead to a hardening in the 10-year G-sec yield in the next few months, even though there is a limited likelihood of a sharp step-up in the government’s dated borrowings for FY23,” Nayar said.