Data on government finances released by the Controller General of Accounts last week shows that the Centre’s fiscal deficit for 2022-23 is unlikely to significantly exceed the revised estimates presented in the recent Union budget, notwithstanding concerns over deviations in both income and expenditure. On the revenue side, the Centre’s tax collections have grown at a healthy pace during April-February 2022-23, despite subdued growth in February. Gross tax collections have touched Rs 25.4 lakh crore, up 12 per cent over the same period last year. This is only marginally lower than the growth assumed in the revised estimates for the full financial year.
Direct tax collections have grown at a considerably faster pace than indirect taxes. Data released on Monday shows that provisional direct tax collections (net of the refunds) have in fact exceeded the revised estimates by 0.69 per cent. Under direct taxes, growth in income tax has so far (April-February) outpaced corporate tax collections, while on the indirect tax side, excise duty collections remain subdued, even as GST has exhibited a healthy growth. Data released on Saturday shows that GST collection in March stood at Rs 1.6 lakh crore, up around 13 per cent over the same period last year. For the full year, gross collections are estimated to be 22 per cent higher than last year. However, overall tax collections have grown at a slower pace than nominal GDP growth. And while non-tax revenues are in line with the target, proceeds from disinvestment remain a matter of concern. As against a target of Rs 60,000 crore, collections at the end of February stood at Rs 38,640 (including the proceeds from monetisation of national highways).
On the expenditure side, while spending did slow down in February, overall central government spending for the year (April-February) grew by around 11 per cent, marginally higher than what was factored in the revised estimates. Capital spending has grown at a significantly higher pace of 21 per cent so far, as the government has focused on ramping up investments. To achieve the target for the full year, however, spending will have to grow by 28 per cent in March. In comparison, capital expenditure by state governments has been relatively subdued. As per a report by ICRA, 15 states had spent only 54 per cent of their capital expenditure targets for 2022-23 during the first 10 months of the year (April-January). This implies that in order to meet their targets, states would have had to raise spending by 76 per cent in February and March. Failure to meet this year’s targets will also raise questions over their ability to achieve the scaled up targets in 2023-24. As states account for a significant share of overall public sector investments, their spending is critical for driving investment activity. The slower pace of state capex raises questions over the extent to which the public sector can drive the economic momentum.
