Fiscal deficit widens to 59% of BE in Apr-Nov owing to higher capex

The Centre’s 63.4 per cent increase in capital expenditure in April-November 2022 has pushed the country’s fiscal deficit to nearly 59 per cent of the Budget Estimate (BE).

Data released by the Controller General of Accounts (CGA) on Friday showed capex rose to Rs 4.47 lakh crore in the period under review, as against Rs 2.73 lakh crore in the year-ago period. The government has set a capex target of over Rs 7.50 lakh crore for the current financial year.

The road ministry spent the most (₹1.58-lakh crore) in nine months of the current financial year, while the railways spent over ₹1.42-lakh crore (₹66,000 crore) a year ago; Other ministries also performed well.

Fiscal deficit, as a result of higher spending, widened to over ₹9.78-lakh crore in April-November 2021 as against ₹6.95-lakh crore, the data showed.

drainage balance

In a note, Devendra Kumar Pant (Chief Economist) and Paras Jasrai (Analyst) of India Ratings and Research (Ind-Ra) said the fiscal deficit during April-November 2022 was the second lowest in last 11 years. Higher devolution to states in the form of share of central taxes and a slowdown in gross tax revenue impacted the government’s cash balance with the RBI. The balance at the end of November stood at ₹1.55 lakh crore as against ₹2.24 lakh crore at the end of October.

Additionally, the government has borrowed Rs 9.63 lakh crore from the domestic market and Rs 14,975 crore externally. “Ind-Ra expects strong revenue collection growth to slow down in the rest of FY23 due to a combination of lower real growth and deceleration in inflation in H2 FY23. However, notwithstanding this, financing of additional expenditure on account of higher food and fertilizer subsidies or any other unforeseen expenditure is unlikely to destabilize the budgeted fiscal arithmetic,” the note said.

Based on the additional cash outlay announced in the first supplementary demand for grants for FY2023 and the expected savings of around Rs 1 lakh crore in recent days, ICRA chief economist Aditi Nayar said, “We estimate the range. Overshoot in fiscal deficit by around ₹0.8-lakh crore for FY23. As a proportion of GDP, the fiscal deficit is unlikely to exceed the BE of 6.4 per cent.