In absolute terms, the fiscal deficit hit ₹14.54 lakh crore in the first 11 months of FY23, against Rs 13.17 lakh crore a year earlier.
Net tax revenues grew at a healthy pace of 17% until February this fiscal year, blunting the impact of a 20% drop in non-tax revenues, a 9% increase in revenue spending and a 22% rise in capital expenditure.
Analysts don’t expect a slippage in the fiscal deficit target of 6.4% of GDP (or ₹17.55 lakh crore) for FY23.
This is despite concerns about the flow of corporation tax and disinvestment receipts, and the announcement of two batches of supplementary demand for grants. Higher dividend by central public sector enterprises has offset the shortfall in disinvestment revenue for FY23, according to separate finance ministry data.
As for February alone, total expenditure dropped 3% from a year earlier, as capex shrank by a half offsetting a 5% rise in revenue expenditure. Capex now needs to rise at a healthy pace of 28% in March to meet the revised target for FY23, while revenue spending needs to grow only 2.5%.Icra chief economist Aditi Nayar said the smaller incremental fiscal deficit for the month of February from the year-ago period benefitted from the step-down in tax devolution between these two months, and subdued capex.”With limited fiscal concerns, and the end of monetary policy tightening in sight by the RBI as well as the US Fed, ICRA expects the 10-year G-sec yield to trade between 7.25-7.50% in H1 FY2024,” she said. The benchmark 10-year G-sec yield stood at 7.31% on Friday.