Fiscal deficit expected to follow previous years' trend in June quarter

Centre's capex outlay may touch 20 per cent of full-year target in Q1 at Rs 1.5 trillion

The Controller General of Accounts is expected to release the fiscal deficit data for the first quarter of financial year 2022-23 (Q1FY23) on Friday. The revenue, expenditure and fiscal deficit data are expected to be in line with previous years’ trends (as a percentage of full-year targets), due to what officials, including Union Finance Minister Nirmala Sitharaman, have termed "first quarter lethargy."

It is in Q2 that outlays are expected to pick up, especially on capital expenditure (capex), as Rs 1 trillion in long-term capex loans to states are expected to be disbursed.

The fiscal deficit for April-May FY23 was 12.3 per cent of the full-year fiscal deficit target of Rs 16.6 trillion. In Q1FY22, the fiscal deficit was 18.2 per cent of that year’s target.

Capex

As reported by Business Standard earlier, the Centre’s capex outlay for Q1FY23 could be close to Rs 1.5 trillion. As a percentage of full-year Budget estimates of Rs 7.5 trillion, it is expected to be at a similar level as in the past few fiscal years.

Senior officials said that the finance ministry is satisfied so far with the pace of capex by various infrastructure ministries and constant monitoring of the big ticket infrastructure projects shows that the money is being spent effectively.

In Q1FY22, capex came in at Rs 1.1 trillion, around 20 per cent of the full-year target of Rs 5.5 trillion. A capex outlay of Rs 1.5-trillion in Q1FY23 would be at the same levels as a percentage of BE of Rs 7.5 trillion. Out of this amount, Rs 1 trillion is meant as 50-year, interest free loans to states for their capex needs.

As the economy recovers from two years of the Covid-19 pandemic, the Centre has made capex on high multiplier infrastructure projects the cornerstone of its revival plans, and is sticking to it in the current scenario, where growth is being impacted by global headwinds.

“The route we have chosen and the one we are sticking with is capex. Even during the pandemic, we adopted this method of spending on capital assets, and made sure the economic revival happens. And states really showed that they had the absorptive capacity,” Sitharaman had told Business Standard in earlier.

Revenue

Revenues are expected to see a boost thanks to strong goods and services tax (GST) collections and the windfall and export tax imposed on oil companies.

GST revenue grew 56 per cent year-on-year (YoY) to Rs 1.45 trillion in June — the second-highest mop-up ever. The percentage increase can be attributed to the low base of Rs 92,800 crore last June because of the second wave of Covid-19. However, the collections in June have only been surpassed once – in April 2022, when the mop-up was a record Rs 1.67 trillion. April numbers are usually high due to arrears filed in March.