Home / Economy / Fiscal deficit close to 60%; core output up

NEW DELHI : India’s fiscal deficit for the current financial year approached 60% of the year’s target in December, a month in which the economy saw a rise in core sector output.

Meanwhile, eight core infrastructure industries grew 7.4% in December, against 4.1% a year earlier.

According to official data released on Tuesday, the fiscal deficit till December reached 59.8% of the FY23 target, led by the increase in capital expenditure and the moderate rise in tax collections.

Graphic: Mint
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Graphic: Mint

Revenue receipts stood at 17.70 trillion, of which tax revenue was 15.56 trillion and non-tax revenue 2.14 trillion.

The government has budgeted a fiscal deficit of 16.61 trillion or 6.4% of the GDP for FY23.

Aditi Nayar, chief economist of ICRA, stated that gross tax revenues grew a marginal 0.8% in December, dampened by personal income tax and excise duty.

“With a typical surge in receipts in the last quarter and a cushion provided by an assessed year-on-year decline in tax devolution, we expect the overshoot in the government’s fiscal deficit to be limited to 0.8 trillion relative to the FY2023 BE (budget estimate), with the target of 6.4% of GDP likely to be met," Nayar added.

With infrastructure sectors growing robustly in December, the output of all core sectors is now higher than the pre-covid level, economists said.

The eight sectors—coal, crude oil, natural gas, refinery products, fertilizer, steel, cement and electricity—grew by 8% in April-December, compared to 12.6% during the same period last fiscal.

Production of coal rose by 11.5%, electricity by 10%, steel by 9.2%, cement by 9.1%, and fertilizers by 7.3% in December.

“Much in tune with the Economic Survey, which has painted an optimistic picture of the economy, core sector growth for December has come in at 7.4%, thus taking the cumulative number to 8% for the first three quarters. With the exception of crude oil, all segments witnessed positive growth. Crude oil production has been affected due to volatile prices as well as limited investment in new fields," said Madan Sabnavis, chief economist at Bank of Baroda.

“With 7.4% growth in core industries which have a share of around 40% in the Index of Industrial Production (IIP), the latter may be expected to increase by 4-5% this month," Sabnavis added.

“Another notable feature of December 2022 core sector data is that the output of all the sectors is now higher than the pre-covid levels (February 2020). The output of the eight core sectors stood 13.6% higher than the pre-covid level. Even the momentum (month-on-month seasonally adjusted) was at a 10-month high of 3.2% in December 2022, up from 2.5% in the previous month," India Ratings and Research said.

Given the weight of core sector industries in industrial output, it expects Index of Industrial Production to grow at around 7% in December 2022.

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