Clipped from: https://www.financialexpress.com/policy/economy-robust-tax-non-tax-receipts-boost-centres-finances-3293076/
Fiscal deficit at 39% annual target in H1
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The Centre’s fiscal deficit was within a very comfortable level at around 39.3% of the budget estimate (BE) in the first six months of the current financial year compared with 37.3% of the respective target in the year-ago period.
While net tax revenues, the largest of receipts, rose by 15%, non-tax revenues expanded by 50% thanks to higher RBI dividend. This was amidst a 10% growth in revenue expenditure, and a robust 43% annual expansion in capex.
Revenue expenditure declined by 4% to Rs 3.3 trillion in the month of September 2023, whereas capex expanded by 29% to Rs 1.2 trillion, the highest in any month in H1FY24.
“With this, 49% of the FY24 Budget Estimate for capex had been achieved, which is favourable in light of the potential slowdown closer to the Parliamentary elections,” Icra chief economist Aditi Nayar said.
Given the larger surplus receipts from the RBI and likely healthy profits of state-run entities, the Centre’s total dividend receipts could exceed the budget target by around Rs 60,000 crore in FY24, according to an FE analysis.
RBI’s surplus transfer to the Centre rose 188% on year to Rs 87,416 crore in FY24 (for accounting year FY23), which was very close to Rs 91,000 crore estimated from dividend receipts from the RBI, public sector banks and financial institutions (Rs 48,000 crore) and the CPSEs in FY24.
The additional non-tax revenues will likely to provide some cushion to meet any undershooting in other revenues streams including disinvestment or potential overshooting in expenses, relative to respective BE, such as on job guarantee programme (MGNREGS) and cooking gas subsidy.
Gross tax collections (before devolution) expanded by a healthy 16% on year in April-September FY24. With a 27% rise in corporation tax collections in September 2023 amidst healthy advance tax inflows, nearly 49% of the FY24 BE had been collected, which is an encouraging trend. Moreover, half the personal income tax target of FY24 BE had been achieved in H1 FY24.
While tax devolution in September 2023 was in line with the previous month, it was 25% higher than the year-ago level. To meet the FY24 BE, the Centre has to release Rs 5.66 trillion to the states in the next six months, which is nearly the same as the amount devolved in October-March in FY23 as per Icra’s calculations.
The Centre’s expenditure on major subsidies — food, fertiliser and fuel – rose marginally to Rs 2.06 trillion in H1 FY24 compared with Rs 1.99 trillion in the year ago period.
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