Fiscal Deficit Reaches 7.5% Of Full-Year Target In April

The central government's fiscal deficit for the first month of fiscal 2024 reached 7.5% of the full-year budgeted target, nearly double from the same period last year.

In absolute terms, the fiscal deficit stood at Rs 1.33 lakh crore, against the budgeted estimate of Rs 17.9 lakh crore.

Net tax revenues and non-tax revenues reported sharp contractions of 13.9% and 8.2%, respectively, noted Aditi Nayar, chief economist, head of research and outreach, ICRA Ltd. This is amidst a 15.2% rise in revenue expenditure and a 0.6% fall in capex that may have been hampered by unseasonal rains, she said.

The union government also received a higher-than-budgeted dividend surplus from the Reserve Bank of India, which is likely to help cushion any undershooting in other revenue streams or overshooting in expenses relative to respective budget estimates, Nayar said.

Tax revenue (net to the centre) in the first month came in at Rs 1.58 lakh crore, accounting for 6.8% of the full year's tax target of Rs 23.3 lakh crore. Whereas, non-tax revenue stood at Rs 10,958 crore, achieving a mere 3.6% of the target.

The centre's total expenditure in April stood at Rs 3.04 lakh crore in absolute terms, or 6.8% of the full-year budget estimate of Rs 45.03 lakh crore. Of this, capital expenditure stood at Rs 78,457 crore, 7.8% of the budgeted target.

The government had hiked its capex spend plan in the 2023 union budget to Rs 10 lakh crore, a 33% jump from last year's outlay of Rs 7.5 lakh crore.

Revenue expenditure amounted to Rs 2.25 lakh crore, or 6.4% of budgeted estimates.

Out of the total revenue expenditure, Rs 47,929 crore is on account of interest payments, and Rs 25,161 crore is on account of major subsidies.

While there are limited fiscal concerns and no rate hike anticipated in the future, higher state government borrowings in the coming months could keep the 10-year G-sec yield in a range of 7–7.2% in the remainder of the first half of FY24, Nayar said.