The central government budget deficit stood at Rs 3.52 lakh crore from April to June, 21.2 percent of the full-year target, according to data released by the Comptroller General on July 29.
The budget deficit in the first three months of FY22 was Rs 2.74 crore. This means that the budget deficit for the first quarter of the current financial year is 28.3% higher on an annual basis.
The budget deficit for April-June 2021 was 18.2% of the FY22 target.
The center is targeting a budget deficit of Rs 16.61 crore or 6.4% of GDP for FY23.
The widening of the budget deficit in June, a month in which a deficit of Rs 1,480 crore was recorded, was partly due to the impact on public finances following the announcement of a reduction in excise duties on gasoline and diesel to end of May.
Economists expect the center’s revenue to take a hit of more than Rs 80,000 crore in FY23 from the consumption tax cut alone.
Excise duty receipts in June totaled Rs 30,402 crore, down 1.8% from the same month last year.
Total gross tax receipts increased by 22.4% from April to June, but only increased by 12.8% in June to Rs 6.50 lakh crore and Rs 2.47 lakh crore respectively.
Meanwhile, tax-free profits fell by more than 50% from April to June, with the center still trying to ignore the impact of the significantly lower-than-expected Reserve Bank of India dividend paid out in May.
Overall, total revenue for April through June was up 8.9% year over year.
On the spending side, June was another good month for investments with the center getting closer to its budget target of Rs 7.5 lakh crore.
In June, the center made investments of Rs 67,990 crore, bringing the total for the first quarter of FY23 to Rs 1.75 crore lakh, or 23.4% of the target for the year ended.
While investment rose 40.1% year-on-year in June, total spending increased at a more sedate pace, up 5.4% to 3.62 lakhcrore. From April to June, the total central government spending was Rs 9.48 lakh crore, up 15.4 percent from the first quarter of FY22.
While the center’s finances appear to be in good shape so far, risks could emerge in the coming months as global uncertainty and slowing growth weigh heavily and the government is forced to spend more on key items such as subsidies for food and fertilizers. At the same time, revenues could come under pressure if more excise tax cuts are announced to protect consumers from skyrocketing gasoline and diesel prices and curb inflation.
“Unless the free food grain program is extended beyond September, we do not expect the fiscal deficit to exceed 6.4% of GDP based on an assumption of 15% nominal GDP growth,” said Aditi Nayar, chief economist of CIFAR.
The Pradhan Mantri Garib Kalyan Anna Yojana, or PM-GKAY, was extended for six months in March. Providing free grain under the program until September will cost the center 80,000 rupees.