India Apr-Jan fiscal deficit at ₹11.03 trillion, 64% of annual target

New Delhi: India’s fiscal deficit during the first ten months of FY24 stood at ₹11.03 trillion, or 63.6% of the revised annual estimate, according to data released by the Controller General of Accounts on Thursday.

The fiscal deficit for the corresponding period of the previous year stood at ₹11.91 trillion, or 67.8% of the annual estimate of ₹17.55 lakh crore for FY23.

The budgeted annual estimates for fiscal deficit, which was revised in the vote on account budget on 1 February, was at ₹17.87 trillion for FY24.

The decline in the fiscal deficit, despite a jump in government spending to fuel economic growth, was due to higher tax receipts and an increase in non-tax revenue.

The Centre aims to reduce the fiscal deficit—the difference between the government’s income and expenditure—to 5.8% of gross domestic product during FY24, from 6.4% in the previous fiscal year.

The fiscal deficit target was revised from 5.9% of gross domestic product during FY24 during the recently tabled vote on the account budget.

The government is committed to lowering the fiscal deficit to 5.1% of GDP by FY25.

A higher fiscal deficit leads to a higher debt burden and more spending on debt servicing, which can be unhealthy for an economy and risks devaluing the currency and impacting private investments.

Capital expenditure rose to ₹7.21 trillion during April-January FY24, or 75.9% of the revised annual estimate, from ₹5.70 lakh crore in the same period in FY23.

Total receipts during the April-January FY24 period stood at ₹22.52trillion, or 81.7% of the revised annual estimate, of which tax receipts stood at ₹18.80 lakh crore, or 80.9% of the revised annual estimate.

Non-tax revenue stood at ₹3.38 trillion, or 90% of the revised annual estimate.

Total expenditure rose to ₹33.55 trillion, or 74.7% of the revised annual estimate, from ₹31.68 trillion in the corresponding period in FY23.

While the Union government has accelerated coverage and extended tenures of its flagship welfare programmes ahead of the upcoming general election, experts believe the government has much headroom left in its spending targets during the remaining two months of the ongoing fiscal year.

The government is likely to maintain its fiscal deficit target due to higher-than-expected tax and non-tax revenues even if it exceeds its spending target.

The Centre expects higher non-tax revenue, including dividends from the Reserve Bank of India and state-run banks, to offset any revenue shortfall from disinvestment and maintain its fiscal deficit target for FY24.

“Notably, the headroom left for revenue spending in the last two months of FY2024 ( ₹9.1 trillion) is 6% higher than the expenditure recorded in the year-ago period," rating agency Icra said in a statement.

“The Government's gross tax revenues need to record a moderate 6% growth in the last two months of FY2024 to meet the revised estimates for the year, which seems imminently achievable," Icra added.