India’s April-June fiscal deficit at ₹3.52 lakh cr, 21% of FY23 target

India's federal fiscal deficit for the three months through June rose lower-than expected to ₹3.52 lakh crore, accounting for 21.2% of the full-year target, data released by the Controller General of Accounts showed on Friday.

Meanwhile, tax collections rose at a faster-than-expected pace. Tax collections grew, partly due to higher inflation, helping the government collect more goods and services tax (GST), as well as higher corporate tax receipts on improved economic activity.

Net tax receipts rose to ₹5.06 lakh crore while total expenditure was ₹9.48 lakh crore, the data showed.

The fiscal deficit in the first three months of FY 2021-2022 was ₹2.74 lakh crore. As such, the fiscal deficit in the first quarter of the current fiscal is 28.3% higher on a year-on-year basis.

The fiscal deficit for April-May FY23 was 12.3% of the full-year fiscal deficit target of ₹16.6 lakh crore. 

The fiscal deficit for April-June 2021 had accounted for 18.2% of the FY22 target.

The government is targeting a fiscal deficit of ₹16.61 lakh crore for FY23, or 6.4% of GDP.

On the expenditure side, the government's spending on major subsidies including food and fertilisers, came down around ₹68,000 crore during April-June period, compared to over ₹1 lakh crore a year earlier.

This has given a confidence to finance ministry officials that they could meet the targeted fiscal deficit despite headwinds on the economic front.

Kaushik Das, chief economist at Deutsche Bank said the government could hold the 2022/23 fiscal deficit close to the target, assuming no further tax duty cuts or additional spending was announced.

In February, while presenting the annual budget, Union Finance Minister Nirmala Sitharaman set the fiscal deficit target at 6.4% of GDP for 2022/23 starting April, compared to 6.7% in the previous fiscal year.

In May, the Centre cut taxes on petrol and diesel and cooking gas to provide a relief to consumers, after a surge in global crude oil prices.

The government told lawmakers this week that in the first three months of current financial year, the GST collections rose to ₹2.09 lakh crore or nearly 27% of the target for the whole year.

The Indian economy is expected to grow around 7.2% year-on-year in the fiscal year in the current fiscal year, down from earlier estimates of over 8%, and 8.7% in the previous year.