The Controller General of Accounts (CGA) has released official data revealing that the central government’s fiscal deficit for the financial year 2023-24 stood at Rs 2.1 lakh crore or 11.8% of the full-year budget estimates as of May 2023. This represents a significant improvement compared to the previous year when the fiscal deficit reached 12.3% of the budget estimates.
The reduced fiscal deficit in May 2023, as compared to May 2022, demonstrates the government’s dedication to efficiently manage its expenditure and revenue. Fiscal deficit is a crucial indicator of the government’s borrowing needs, and a decrease in this deficit implies a lower amount of borrowing required to finance its operations.
Based on CGA data, the fiscal deficit at the end of May 2023 amounted to Rs 2,10,287 crore. This data indicates a positive trend towards achieving the government’s fiscal targets for the current financial year.
One of the key contributors to the improved fiscal deficit was a remarkable surge of 173% in non-tax revenue. This surge was primarily driven by the dividend received from the Reserve Bank of India (RBI). However, net tax revenue experienced a contraction of 9.6% during the same period, emphasizing the need for continued efforts to enhance tax collection mechanisms.
The central government’s total expenditure during the first two months of 2023-24 amounted to Rs 6.25 lakh crore, which corresponds to 13.9% of the estimates presented in the Union Budget for the current fiscal year.
Among the total revenue expenditure, a significant portion of Rs 1.1 lakh crore was allocated to interest payments, while major subsidies received Rs 55,316 crore.
Regarding capital account expenditures, the central government invested Rs 1.67 lakh crore during the review period, indicating a focus on infrastructure development and investments.
Based on the encouraging fiscal deficit trends and the surge in non-tax revenues, Aditi Nayar, Chief Economist at Icra, expects limited fiscal concerns. Additionally, it is predicted that the Reserve Bank of India’s monetary policy committee may not raise policy rates in the immediate term.
However, Nayar highlights that higher state government borrowings in the upcoming quarter could have implications for the 10-year G-sec yield, which is projected to remain in the range of 7.0-7.2% for the remainder of the first half of the fiscal year.
According to CGA data, the central government has transferred Rs 1,18,280 crore to the states as their share of taxes up to May 2023, demonstrating efforts to support and strengthen state government finances.