While the Centre's fiscal deficit stood at just 50.7% of its annual target by November 2023, there is a likelihood of it slightly surpassing the full-year goal of 5.9% of the GDP. Analysts anticipate that due to lower-than-expected nominal GDP growth, the fiscal deficit for FY24 could edge closer to 6%.
Devendra Kumar Pant, Chief Economist & Senior Director – Public Finance at India Ratings and Research, indicated, 'The government is expected to achieve its FY24 fiscal deficit target in absolute terms; however, the slower nominal GDP growth might elevate the fiscal deficit in terms of the GDP ratio to 6%.'
Pant highlighted the pressure points for the FY24 fiscal deficit, which stem from disinvestment and revenue expenditure. India Ratings' estimates suggest that the union government's revenue receipts in FY24 might reach Rs 1.9 lakh crore, comprising tax revenue of Rs 1.2 lakh crore and non-tax revenue of Rs 0.7 lakh crore. This estimate surpasses the Budget projection for FY24, but it is expected that revenue expenditure will exceed this by Rs 2.1 lakh crore.
ICRA has also indicated that a reduced nominal GDP compared to what was originally projected in the Union Budget might lead to the fiscal deficit reaching 6% of the GDP.
Aditi Nayar, Chief Economist, Head of Research and Outreach at ICRA Ltd, stated, "Overall, ICRA does not anticipate the fiscal deficit target of Rs 17.9 lakh crore for FY2024 to be exceeded."
The agency foresees that direct taxes will surpass the FY2024 Budget Estimate (BE) by approximately Rs 0.85 lakh crore, with a portion of this compensating for lower-than-expected union excise duty collections, resulting in a gross surplus of at least Rs 0.5 lakh crore. "Excluding the extra funds allocated to states, we project that net tax revenues will exceed the FY2024 BE by a modest Rs 0.3-0.4 lakh crore. However, this surplus is expected to be balanced out by a corresponding shortfall in disinvestment proceeds," Nayar further elaborated.
According to data published by the Comptroller General of Accounts last Friday, the fiscal deficit of the Centre reached Rs 9,06,584 crore from April to November 2023, which accounted for 50.7% of its Budget estimate. Comparatively, the fiscal deficit stood higher at 58.9% of the full-year target during the same period a year prior.
Revenue receipts totaled Rs 17.2 lakh crore, marking 65.3% of the full-year target. While direct tax collections remained strong at Rs 14.3 lakh crore, constituting 61.6% of the Budget Estimate (BE), non-debt capital receipts only reached 30% of the BE by the end of November 2023. Disinvestment proceeds amounted to just Rs 8,858.55 crore, a mere 17% of the BE of Rs 51,000 crore by November 2023.
Even though total expenditure hit Rs 26.5 lakh crore, approximately 59% of the BE, the pace of capital expenditure appears to have decelerated. The Centre's capital expenditure reached Rs 5.85 lakh crore, accounting for 58.5% of the BE of Rs 10 lakh crore.
Analysts foresee a potential slowdown in the upcoming months before the General Elections. "In November 2023, the capex rose marginally by less than 2% year-on-year, coinciding with the festive season. Considering the probable imposition of the model code of conduct in the following quarter, the capex target might not be met," mentioned Nayar.
