When the finance minister presented the Budget last year, she had based her deficit projections for 2023-24 on the assumption that the nominal GDP would be nearly Rs 302 lakh crore.
Current estimates put that number at under Rs 297 lakh crore. Had the absolute deficit numbers stayed at Budget estimates (BE), they would have been a larger proportion of GDP, given that reduction in the denominator. Yet, the revised estimates (RE) put the fiscal deficit at 5.8% of GDP against the budgeted 5.9%.
Was this achieved through higher receipts? Not quite. If anything, total receipts are a tad lower in the revised estimates than in BE (Rs 44.9 lakh cr against Rs 45 lakh cr). What has helped keep the deficit in check is a reduction in “effective capital expenditure” by about Rs 1 lakh crore with the RE of Rs 12.7 lakh cr falling about 7% short of the budgeted figure. Effective capital expenditure includes both Centre’s own capital spending and the grants in aid it gives for the capex of states.
So, despite a somewhat higher than budgeted revenue expenditure (Rs 35.4 lakh crore against Rs 35 lakh crore), total expenditure was contained within the budgeted figure. As a result, fiscal deficit – the gap between total expenditure and receipts other than borrowings – is now estimated to end up at Rs 17.3 lakh crore instead of the Rs 17.9 lakh crore originally budgeted for. That is what ensured it remained within the budget target of 5.9% of GDP.
The fact that receipts fell only very marginally short of the number that the FM had targeted was in turn helped by much higher than expected revenue through dividends from the RBI and public sector banks. The Budget had projected Rs 48,000 crore from this source. But that number has more than doubled to Rs 1,04,407 cr in the revised estimates. The RBI alone gave the govt a dividend of over Rs 87,000 cr. With banks too enjoying a boom in profits in the current year, goverment got a windfall it had not budgeted for.
Goverment’s gross tax revenues are now estimated to be about Rs 34.4 lakh crore, significantly higher than the Rs 33.6 lakh crore originally budgeted for. This was thanks entirely to personal income tax collections being higher than anticipated (Rs 10.2 lakh cr against Rs 9 lakh crore) and more than making up for excise and customs du ties not quite meeting the targets. In the process, personal income tax collections have also outstripped revenues from corporation tax contrary to what was projected at the time of the Budget.
The higher gross tax revenues, however, did not really translate into higher net tax revenues for govt. A higher than projected share for the states and a small adjustment for their share from previous years ensured that the Centre’s net tax revenues were just a touch lower than the Budget had estimated they would be at Rs 23.2 lakh crore against Rs 23.3 lakh crore.
The budget estimates for the coming year project a sizable increase in both tax and non-tax revenues as also in capital expenditure, and a reduction in subsidies. But given that there will be a final Budget presented for the year around July, those numbers are at best indicative.