India’s Fiscal Deficit Widens to Rs 9.82 Lakh Crore in April-December, Nears Half-Year Target

Data released by the Controller General of Accounts on January 31 reveals that the Central government’s fiscal deficit has widened to Rs 9.82 lakh crore in the first nine months of the current financial year, up from Rs 9.07 lakh crore in April-November. This figure accounts for 55.0% of the full-year target of Rs 17.87 lakh crore.

Comparatively, the fiscal deficit in April-December 2022 was 59.8% of the target for the fiscal year 2022-23. The release of these figures precedes Finance Minister Nirmala Sitharaman’s presentation of the interim Budget for 2024-25 in Parliament, where expectations are high for the announcement of a fiscal deficit target of 5.3% of GDP for the next year.

Economists anticipate that, while the Centre may meet its fiscal deficit target of Rs 17.87 lakh crore, there could be a minor slippage in terms of the percentage of GDP. Aditi Nayar, ICRA’s Chief Economist, stated, “ICRA does not expect the fiscal deficit target of Rs 17.9 lakh crore for 2023-24 to be breached. However, a lower nominal GDP than what the Union Budget had pencilled in could result in the fiscal deficit printing at 6.0% of GDP.”

In December, the fiscal deficit surged to Rs 75,694 crore, over five times higher than in December 2022. However, for April-December 2023 as a whole, the fiscal deficit was down 1% year-on-year.

The notable increase in December’s fiscal deficit was driven by a substantial rise in capital expenditure, more than doubling year-on-year to Rs 87,985 crore, bringing the total for the year to Rs 6.74 lakh crore. Economists had previously expressed concerns about the government missing its record target of Rs 10 lakh crore for 2023-24.

Total expenditure for the month of December rose by seven percent to Rs 4.02 lakh crore, contributing to a year-to-date spending of Rs 30.54 lakh crore, representing 67.8% of the full-year target and an 8.4% increase compared to the first nine months of 2022-23.

On the income side, total receipts in December were down 9.5% year-on-year at Rs 3.26 lakh crore. Net tax revenue saw an 11.1% decrease, despite gross tax revenue rising nearly 13%, driven by a 15% increase in corporate tax collections and a 24% jump in income tax mop-up. The government’s total receipts for April-December were up 13.5% at Rs 20.72 lakh crore, with non-tax revenue surpassing the Budget estimate of Rs 3.02 lakh crore in December, standing at Rs 3.12 lakh crore so far this year, largely due to the substantial surplus transferred by the Reserve Bank of India (RBI) in May.