Govt meets 6.4% fiscal deficit target for FY23

The Union government met its fiscal deficit target of 6.4% of the gross domestic product (GDP) for 2022-23 on the back of robust tax revenue despite higher revenue expenditure, particularly on account of subsidies and interest payments, official data released on Wednesday showed.

The fiscal deficit for FY23 is in lines with the fiscal glide path envisioned by finance minister Nirmala Sitharaman in the Union Budget for FY24 that she presented on February 1, said a finance ministry official who requested anonymity. Fiscal deficit indicates government’s borrowing to meet the gap between revenue receipts in a particular financial year and expenditure in that period.

The statement of fiscal policy mandated as per the Fiscal Responsibility and Budget Management (FRBM) Act on February 1 read: “The fiscal deficit of the Union Government, estimated at 9.2% of GDP during the pandemic year FY 2020-21, moderated to 6.7% of GDP in FY 2021-22 and is budgeted to decline further to 6.4% of GDP in FY 2022-23.”

Sitharaman aimed to further reduce the fiscal deficit to 5.9% of GDP in 2023-24, and the number expected to taper down gradually to 4.5% of GDP by FY26. “In my Budget Speech for 2021-22, I had announced that we plan to continue the path of fiscal consolidation, reaching a fiscal deficit below 4.5 per cent by 2025-26 with a fairly steady decline over the period,” she said in her latest Budget speech on February 1.

Chief economic adviser (CEA) V Anantha Nageswaran said the fiscal deficit numbers show that “the fiscal consolidation is on track”. Pointing at the fiscal deficit number for FY23 he said it is as budgeted “and, therefore, we are on track on the back of sustained economic growth to achieve (a fiscal deficit of) 5.9% (of GDP) budgeted for the current financial year”.

According to data released by the Controller General of Accounts (CGA) on Wednesday, the central government’s total expenditure was ₹41,88,837 crore in FY23 – ₹34,52,518 crore on revenue account and ₹7,36,319 crore on capital account. “Out of the total revenue expenditure, ₹9,28,424 crore is on account of interest payments and ₹5,30,959 crore is on account of major subsidies,” a finance ministry statement said.

On the revenue side, the Union government’s total receipts were ₹24,55,706 crore in 2022-23 that comprised ₹20,97,368 crore tax revenue (net to centre after sharing with states), ₹2,86,151 crore of non-tax revenue and ₹72,187 crore of non-debt capital receipts. Non-debt capital receipts comprise recovery of loans ( ₹26,152 crore) and miscellaneous capital receipts ( ₹46,035 crore).

According to CGA provisional data, the fiscal deficit in absolute terms was ₹17,33,131 crore, which is marginally lower than the amount projected in the revised estimates (RE) in the Budget. During the fiscal, ₹9,48,406 crore was transferred to state governments as devolution of share of taxes by the centre, which was ₹50,015 crore higher than the previous year, the statement said.

“The Government of India was able to restrict its FY2023 fiscal deficit at Rs. 17.3 trillion, a shade below the FY2023 RE, with higher than estimated revenue receipts and a small undershooting in revenue expenditure, offsetting the disinvestment miss and a healthier than expected capex,” Aditi Nayar, Chief Economist and Head - Research and Outreach at ICRA Ltd said.

In the current financial year, the “higher than budgeted dividend surplus transfer of ₹87420 crore from RBI is likely to provide some cushion to meet any undershooting in other revenues streams or overshooting in expenses, relative to respective budget estimates,” she added.