Budget projects FY24 revenue deficit at 5.9% of GDP
01 Feb 2023
Continuing the path of fiscal consolidation, the Budget proposes to bring fiscal deficit of the government from the current level of 5.9 per cent to below 4.5 per cent of GDP by 2025-26, finance minister Nirmala Sitharaman said while presenting the Union Budget 2023-24 in Parliament.
The fiscal deficit of the government is currently estimated to be 5.9 per cent of GDP. To finance the fiscal deficit in 2023-24, the net market borrowings through dated securities are estimated at Rs11.8 lakh crore. The balance financing is expected to come from small savings and other sources. The gross market borrowings of the government for the 2023-24 fiscal are estimated to be around Rs15.4 lakh crore.
In Budget Estimates 2023-24, the finance minister stated that the total receipts other than borrowings and the total expenditure are estimated at Rs27.2 lakh crore and Rs45 lakh crore, respectively. Moreover, the net tax receipts are estimated at Rs23.3 lakh crore.
In the Revised Estimate 2023-24, the finance minister stated that the total receipts other than borrowings is Rs24.3 lakh crore, of which the net tax receipts are Rs20.9 lakh crore. The Revised Estimate of the total expenditure is Rs41.9 lakh crore, of which the capital expenditure is about Rs7.3 lakh crore. The Revised Estimate of the fiscal deficit is 6.4 per cent of GDP in RE 2022-23, adhering to the Budget Estimate.
Revenue deficit
Revenue deficit for the fiscal is expected to be at 2.9 per cent in FY24 over 4.1 per cent in 2022-23. Global headwinds and global economic uncertainties continue to pose constraints which are often beyond the direct control of domestic economic policy levers. Although new development and welfare-related expenditure commitments, buoyancy in tax receipts and targeted expenditure rationalization during the year have helped to continue with the thrust on rapid inclusive development.
The fiscal policy statement noted that in FY23, due to the sudden outbreak of geopolitical conflict that jeopardised food and energy security, there was a higher food and fertiliser subsidy requirement for supporting the vulnerable and ensuring macroeconomic stability.
Sitharaman reiterated government’s commitment to pursue a broad path of fiscal consolidation to attain a level of fiscal deficit lower than 4.5 per cent of GDP by FY2025-26. The government would continue with its efforts to attain sustained, broad-based economic growth, and take such measures as may be necessary to protect the lives/livelihoods of the people, while adhering to the path of fiscal rectitude.
Gross Tax Revenue (GTR) is projected to grow at 10.4 per cent in FY2023-24 over FY2022-23. Both, the direct and indirect Tax receipts are individually estimated to grow at 10.5 per cent and 10.4 per cent, respectively. It is estimated that the direct and indirect taxes will contribute 54.4 per cent and 45.6 per cent, respectively, to GTR, as per the fiscal policy statement. The tax to GDP ratio is estimated at 11.1 per cent.
The overall medium term thrust of the tax policy is towards rationalizing tariff structure and widening the tax base. This is being achieved by removing tax inversions which have crept in the tax structure and pruning the exemptions. In addition, measures are being taken for widening the tax base, easing compliance for the taxpayers, formalization of the supply chain and improving ease of doing business.
The total revenue receipts and revenue expenditure of the centre are estimated at Rs26.32 lakh crore and Rs35.02 lakh crore, respectively, in BE 2023-24. Based on this, the ratio of revenue receipts to revenue expenditure is estimated at 75.2 per cent in BE 2023- 24 improving from 67.9 per cent and 67.8 per cent in RE 2022-23 and FY 2021-22, respectively. Tax-GDP ratio has improved from 10.7 per cent in BE 2022-23 to 11.1 per cent in RE 2022-23 and BE 2023-24
Non tax revenue
Non tax revenue is estimated to contribute 11.5 per cent of the revenue receipt and is projected to be at Rs3.02 lakh crore, which is 15.2 per cent more than the RE 2022-23 of Rs2.62 lakh crore.
Non-debt capital receipts
Non-debt capital receipts (NDCR) in BE 2023- 24 is estimated at Rs84,000 crore, which includes the receipts under the recovery of loans and advances (Rs23,000 crore), receipts from monetisation of roads (Rs10,000 crore), etc. The actual realisation of the Non-Debt Capital Receipts significantly depends on the prevailing market conditions, expected valuation assigned to the government stake etc.
Capital expenditure to fiscal deficit ratio
The ratio of capital expenditure to fiscal deficit (Capex-FD) is estimated at 56.0 per cent in BE 2023-24 compared to 41.5 per cent in RE 2022-23 and 37.4 per cent in FY 2021-22.
Fiscal deficit of states
States will be allowed a fiscal deficit of 3.5 per cent of GSDP, of which 0.5 per cent will be tied to power sector reforms. States will also be provided a fifty-year interest free loan. The entire fifty-year loan to states has to be spent on capital expenditure within 2023-24. Most of this will be at the discretion of states, but a part will be conditional on states increasing their actual capital expenditure. Parts of the outlay will also be linked to, or allocated for, the following purposes:
- Scrapping old government vehicles
- Urban planning reforms and actions
- Financing reforms in urban local bodies to make them creditworthy for municipal bonds
- Housing for police personnel above or as part of police stations
- Constructing Unity Malls
- Children and adolescents’ libraries and digital infrastructure