The central government's fiscal deficit stood at Rs 5.42 lakh crore in April-August, accounting for 32.6 percent of the full-year target, data released by the Controller General of Accounts showed.

The fiscal deficit for April-August 2021 had accounted for 31.1 percent of the FY22 target.

The fiscal deficit in the first five months of FY22 was Rs 4.68 lakh crore. As such, the fiscal deficit in April-August of the current financial year is 15.7 percent higher on a year-on-year basis.

The Centre is targeting a fiscal deficit of Rs 16.61 lakh crore for FY23, or 6.4 percent of GDP.

The Centre posted a fiscal deficit of Rs 2.01 lakh crore in August after it recorded a surplus of Rs 11,040 crore in July  the first time it had done so in 28 months. The last time the central government’s monthly accounts were in surplus was in March 2020, at the beginning of the coronavirus pandemic.

In August, the Centre's net tax revenue fell 70.7 percent year-on-year to Rs 33,882 crore, while non-tax revenue jumped 213.2 percent to Rs 27,221 crore. This caused total receipts to shrink 50 percent to Rs 62,511 crore.

Total expenditure, meanwhile, dropped by 3.3 percent in August to Rs 2.63 lakh crore, while capital expenditure gained 0.5 percent from last year to Rs 43,658 crore.

The Centre, on August 10, released Rs 1.17 lakh crore to states as tax devolution - double of what it would have normally transferred after assessing that its collections were doing well.

The net revenue receipts in the month of August halved from August 2021, primarily on account of the double instalment of tax devolved to the state governments given the buoyancy in revenues, Aditi Nayar, Chief Economist ICRA, said.

Additionally, various taxes such as corporation tax, personal income tax, excise duty, customs duty and CGST saw a on year decline in August.

"Based on our projection, tax devolution will need to be as high as Rs 9.3 lakh crore this year, overshooting the budget estimates by more than Rs 1 lakh crore. Therefore, the amount left to be disbursed to the states in the remainder of the year is quite substantial, warranting a reassessment of the monthly releases in the next quarter," Nayar said.

For April-August as a whole, the Centre's total receipts stood at Rs 8.48 lakh crore, up 4.9 percent, while total expenditure was 8.9 percent higher at Rs 13.90 lakh crore.

Despite the rise in the fiscal deficit, the Centre's finances continue to look in good shape.

Speaking to reporters late last month, Finance Secretary TV Somanathan had said the fiscal deficit target of 6.4 percent of GDP for FY23 would be met without cutting capital expenditure.

The government has also cut its market borrowing for the financial year by Rs 10,000 to Rs 14.21 lakh crore, as per its borrowing calendar for the fiscal second half.

(Source:Money Control)