The government’s fiscal deficit during the first nine months of the current financial year stood at ₹9.82 trillion, or 55% of the annual estimate of ₹17.87 trillion, according to data released by the Controller General of Accounts on Wednesday.
Fiscal deficit for the same year-earlier period was ₹9.93 trillion, or 59.8% of the annual estimate of ₹16.61 trillion for FY23.
The decline in the fiscal deficit despite a jump in government spending to fuel economic growth was due to higher tax receipts and an increase in non-tax revenue.
The Centre aims to reduce the fiscal deficit—the difference between the government’s income and expenditure—to 5.9% of gross domestic product during FY24, from 6.4% in the previous fiscal year.
The government is committed to lowering the fiscal deficit to 4.5% of GDP by FY26.
A higher fiscal deficit leads to a higher debt burden and more spending on debt servicing, which can be unhealthy for an economy and risks devaluing the currency and impacting private investments.
Capital expenditure rose to ₹6.74 trillion during April-December FY24, or 67.3% of the annual estimate, from ₹4.90 trillion in the same period in FY23.
Total receipts during the period stood at ₹20.72 trillion, or 76.3% of the annual estimate, of which tax receipts stood at ₹17.30 trillion, or 74.2% of the annual estimate. Non-tax revenue stood at ₹3.12 trillion, or 103.5% of the annual estimate.
Total expenditure rose to ₹30.54 trillion, or 67.8% of the annual estimate, from ₹28.18 trillion in the corresponding period in FY23.
While the Union government has accelerated coverage and extended tenures of its flagship welfare programmes ahead of the upcoming general election, experts expect the government to exceed its spending targets marginally during the ongoing fiscal year. However, the government is likely to maintain its fiscal deficit target due to higher-than-expected tax and non-tax revenues.
“Notably, the headroom left for revenue spending in the last three months of FY2024 is slightly lower than the expenditure recorded in Q4 FY2023. Revenue expenditure appears likely to mildly overshoot the FY2024 (budget estimate), on account of major subsidies and MGNREGS,” rating agency Icra said in a statement.
Under the Mahatma Gandhi National Rural Employment Guarantee Scheme the government provides at least 100 days of guaranteed wage employment in a financial year to every household that has an adult member willing to take up unskilled manual work.
“ICRA expects a lower-than-budgeted capital expenditure to partially offset the overshooting in revenue expenditure in FY2024 compared to the budgeted target. Consequently, ICRA currently projects the (government’s) total expenditure to exceed the FY2024 (budget estimate) marginally by about ₹50 billion (or ₹5,000 crore),” Icra said.
In August, Mint reported that the Union government was unlikely to meet its divestment target of ₹51,000 crore for the current fiscal year.
The government, however, expects higher non-tax revenue, including dividends from the Reserve Bank of India and state-run banks, to offset any revenue shortfall from disinvestment and maintain its fiscal deficit target for FY24.
