The fiscal deficit has reached a four-year low of Rs 5.26 lakh crore or 35% of budget expectations

At the end of the first half of FY22, the central government’s fiscal deficit fell to a four-year low of Rs 5.26 lakh crore, or 35 percent of the budget predictions, thanks to strong tax revenues.

The fiscal deficit was Rs 9.1 lakh crore, or 114.8 percent of budget forecasts, at the same point last year.

According to data released Friday, the government collected more than 60% of the planned revenue receipts in the first six months of the fiscal year ending in September, the highest H1 collection ever.

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The government’s strong financial position is likely to keep bond yields low and allow the government to spend freely to help the economy recover.

Revenues nearly quadrupled to Rs 10.8 lakh crore in the first six months of this fiscal year, beating a 10% increase in expenditure and helping to reduce the budget deficit. The current fiscal year’s first-half fiscal deficit is even smaller than the pre-covid period of Rs. 6.5 lakh crore in H1 FY2020.

“Despite a dimming of the favourable base, the government of India’s gross tax receipts increased by 50% in September 2021, owing to solid advance taxes and the formalisation of the economy,” Aditi Nayar, ICRA’s chief economist, stated.

Tax receipts were Rs 9.2 lakh crore, or 60% of BE, while non-tax receipts were Rs 1.6 lakh crore, or 66% of BE.

With corporation tax, central goods and services tax, customs and excise duty collections exceeding half of the FY2022 BE in H1 FY2022, and rising vaccinations likely to boost confidence and spending in H2 FY2022, gross tax revenues could exceed the FY2022 Budget Estimate (BE) by at least Rs 2 lakh crore, according to Nayar. “A solid tax collection is gradually allowing the government to enhance expenditures by increasing expenditure,” India Ratings’ D K Pant and Paras Jasrai said.

In 1HFY22, revenue spending increased by 6.33 percent over FY21 and 7.35 percent over FY20. It was worth Rs 13.96 lakh crore, or 47.7% of BE. Capex increased to Rs 2.29 lakh crore, accounting for 41.4 percent of BE. The total outlay was Rs 16.26 lakh crore, or 46.7 percent of BE.

Special provision for the full value of consideration in certain cases.

“At the end of September 2021, the government still had an INR1.81 trillion cash surplus with the RBI (end-March 2021: INR1.82 trillion). With such a large cash surplus at the Reserve Bank of India, the government is in a good position to either increase spending or cut market borrowing “Pant and Jasrai agreed.

“In FY2022, we predict the Government of India’s fiscal deficit to be Rs. 13.8-14.8 trillion, or 6.0-6.5 percent of GDP, as opposed to the budgeted Rs. 15.1 trillion,” Nayar added.