The fiscal position of the Central Government has been fairly comfortable during the first half of the current fiscal despite economic headwinds. Gross direct tax collections staged an encouraging recovery in August and September after lagging in the first four months of FY24. Centre’s non-tax collections have been better than anticipated, supported by higher than budgeted dividend transfer from the RBI. On the expenditure front, the noteworthy aspect of the Centre’s expenditure policy has been the progressive improvement in the quality of expenditure as reflected in the ratio of capital expenditure to revenue expenditure. Overall, the government’s fiscal deficit stood at Rs 7 lakh crore in H1 FY24, at 39.3% of the budget estimate (BE). This compares to a fiscal deficit (% of BE) at 37.3% in the corresponding period of the previous year.
Highlights:
- Centre’s fiscal position fairly comfortable in H1 FY24 despite economic headwinds.
- Gross tax revenue increased by 16.3% (y-o-y) amid higher revenue from all major tax heads except excise duty.
- Higher surplus transfer from RBI translated into higher non-tax revenue by 50.2%.
- Proceeds from divestment remained lacklustre at 13.6% of the budgeted value.
- Subsidy bill was at the highest level seen in H1 in the last four years and 3.8% higher than a year ago.
- Capex focus continued with a robust growth of 43% (y-o-y).
- Capex to revenue expenditure ratio increased to 0.30, highest half-yearly figure in the recent years.
- We need to be watchful of the trajectory of revenue spending ahead of the election season, along with the possibility of lower-than-expected nominal GDP growth.
