In FY23, the Central government finances remained fairly comfortable despite several challenges. During the fiscal,
the Centre undertook targeted fiscal measures to curb domestic inflation as global food and energy prices soared following the Russia-Ukraine crisis. However, healthy tax collections have been supportive of the government finances helping offset the impact of several fiscal measures and weak disinvestment receipts. The quantum of
fiscal deficit in FY23 at Rs 17.3 lakh crore was better compared to the revised estimate of Rs 17.6 lakh crore. With
this, the Centre stayed on the path of fiscal consolidation with the fiscal deficit as a percentage of GDP at 6.4% in
line with the earlier estimates and lower than 6.7% in FY22.
Government Receipts
• FY23 was an upbeat year for gross tax revenue collections which were recorded at Rs 30.5 lakh crore, broadly in line with the revised estimate and higher by 12.7% in comparison to the previous year. This was supported by healthy growth in both direct and indirect tax collections recording a growth of 18% and 7.2% respectively.
– Healthy collections from central goods and services tax (21.5% y-o-y growth), income tax (20%), corporate tax (16%), and customs duties (6.8%) aided the growth in gross tax collections in FY23.
– Revenue from excise duty collections during the year was lower by 18.4% (y-o-y) on account of the government’s decision to lower the excise duty on petrol and diesel in May last year.
• The non-tax revenues were at Rs 2.9 lakh crore, lower by 21.6% compared to the previous year. Revenue from
dividends and profits was sharply lower by 37.8% y-o-y. This could be attributed to lower surplus transfer by
the RBI at Rs 30,307 crore as against Rs 99,122 crore in the previous year. However, dividend transfer from public sector enterprises, higher interest receipts, and spectrum revenues helped restrict the shortfall in non-tax revenue.
• Proceeds from disinvestment have been weak at Rs 35,342 crore, missing the revised estimate of Rs 50,000
crore. However, the disinvestment proceeds were higher than last year owing to the initial public offer of Life
Insurance Corporation (LIC).
Government Expenditure
• Revenue expenditure in FY23 at Rs 34.5 lakh crore, increased by 7.8% in FY23 owing to higher spending
towards interest payments, defence, and fertilisers. The main heads of expenditure listed in Table 3 comprised
78% of the government’s total revenue expenditure.
• Total subsidy allocation in FY23 was at Rs 5.3 lakh crore, marginally higher compared to the revised estimate
of Rs 5.2 lakh crore. However, spending towards subsidies spiked 19% y-o-y during the fiscal. Fertiliser subsidy,
a major component of the subsidy burden was at a record-high of Rs 2.5 lakh crore in FY23.
• Capital expenditure (capex) was slightly higher than the revised estimate at Rs 7.4 lakh crore in FY23.
Infrastructure-intensive sectors such as roads and railways were the focus area of capex with a share of close
to 50% of the total capital expenditure. The main heads of capital expenditure listed in Table 4 comprised 83%
share of the total capex.
• Thrust on capex has been the highlight of the government’s expenditure policy in FY23. Amid the Centre’s
sustained push for capex, the quality of expenditure has witnessed an improvement. This is reflected in the
lower revenue expenditure to capital expenditure ratio at 4.7 in FY23 as compared to 5.4 in FY22.
Way Forward
Buoyant tax collections and thrust on capex have been the major highlights of the Centre’s fiscal performance in
FY23. Going forward, the sustained emphasis on capital spending remains a positive with capex budgeted at an
all-time high of Rs 10 lakh crore in FY24. On the receipts front, we expect growth in gross tax collections to
moderate amid a lower nominal GDP growth. The RBI board approved a transfer of Rs 87,416 crore, much higher
than Rs 48,000 crore budgeted in FY24 from RBI, nationalised banks and financial institutions collectively. This is
expected to provide a boost to the Centre’s revenue amid slow disinvestment proceeds.
