The figure showed a sharp improvement from 132% of the earlier deficit target in December, as finance minister Nirmala Sitharaman more than doubled the target to Rs 18.5 lakh crore or 9.5% of gross domestic product from Rs 7.96 lakh crore.
Revenue
Gross tax revenue (GTR) for April-January was almost back to last year’s levels at Rs 15.15 lakh crore, showing a deficit of just 1% over last year’s levels for the same period on the back of sharp improvements in excise duties.
While the combined annual deficit on corporate and income tax and Goods and Services Tax collections stood at Rs 1.6 lakh crore, “There has been major compensation from excise, which is higher by Rs 1 lakh crore (annually) at Rs 2.75 lakh crore, which helps to close the gap,” said Madan Sabnavis, chief economist at CARE Ratings.
However, the GTR expansion for the month of January over last year stood at 20% against a 49% growth in December, said Aditi Nayar, principal economist at ICRA, adding that FY21 RE pegged GTR to contract 20% in February-March 2021, which seemed implausible.
Expenditure
Total expenditure grew 11% year-on-year to Rs 25.2 lakh crore till January, but represented 73% of the revised expenditure target of Rs 34.5 lakh crore, against 84% in January 2020.
“This means there is scope to spend more in the next two months or alternatively cut back on the same to improve the fiscal deficit,” Sabnavis said.
While the Centre’s revenue expenditure grew 8% annually at Rs 21.5 lakh crore till January, capital expenditure showed a sharp 35% annual expansion to Rs 3.62 lakh crore.
With a massive Rs 8.6 lakh crore headroom for revenue expenditure, the government could end up undershooting the deficit target, according to Nayar as, “In our assessment, there could be a modest upside to tax revenues, whereas the revenue spending may be somewhat lower than the amount included in FY2021 RE.”
