Sustained growth in tax collection helped the Centre limit fiscal deficit (difference between income and expenditure) during April-October period to 45 per cent of the Budget Estimate for FY24. The period under consideration also showed strong growth in capital expenditure.
With this, the expectation is that the Centre will be able to contain the deficit within the Budget Estimate of Rs. 17.87 lakh crore – 5.9 per cent of GDP – or perhaps even lower than that. The revised numbers of the full-year deficit will be out on February 1 when Finance Minster Nirmala Sitharaman presents the interim Budget.
Finance Secretary TV Somnathan said there is nothing as of now to change the Budget Estimate of 5.9 per cent. “I’m confident as of today with the information I have that we will adhere to a fiscal targets. And the announcement on the PM Garib Kalyan Yojana does not by itself mean anything for our fiscal consolidation, but we are still committed to that path,” he said.
Further, he added that crude remains at levels the government had expected. Also, the Budget is not directly effected by crude unless there are major movements, and no major movements have happened. “They’ve happened within a narrow range, perfectly within what is normal and on fertiliser. We will give you the numbers and we present the Budget on February first, but we will not be very far from our Budget Estimates,” he said.
TAX COLLECTION
The period under consideration recorded good growth in direct tax collection, led by income tax, which surged around 31 per cent. Corporate income tax rose around 17.5 per cent. Though GST collection, too, is rising and average monthly collection is now more than Rs. 1.50 lakh crore, other indirect taxes such as customs and central excise are lagging.
While customs duty saw less than 1 per cent growth, excise collection went down nearly 10 per cent. Revenue from customs has been affected by lower global trade, while reduction in rate on petrol and diesel last year is still impacting excise duty.
Capital expenditure saw a healthy growth of 33 per cent in the seven-month period, while revenue expenditure saw 6.5 per cent rise.
However, on a y-o-y basis, capex declined 15 per cent and, thus, the lower fiscal deficit. With the model code of conduct likely to be imposed in the ensuing quarter, the capex target may be missed.
Commenting on the numbers, Aditi Nayar, Chief Economist with ICRA, said: “Our baseline expectation is that direct taxes will surpass the FY 24 BE by Rs. 0.85 lakh crore, a portion of which will be absorbed by lower than budgeted union excise duty collections, leaving a gross upside of around Rs. 0.5 lakh crore. Setting aside the additional devolution to the States, we estimate that net tax revenues will exceed the FY 24 BE by a modest Rs. 0.3 lakh crore. However, this will be offset by a similar shortfall in disinvestment proceeds.”
Source: business-line
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