In the realm of India’s fiscal domain for the fiscal year 2023-24, a discernible narrative unfolds. Recent government data reveals that India’s gross tax revenue, encompassing both direct and indirect taxes, has experienced a meager growth of a mere 2.8 percent, culminating at Rs 8.9 trillion during the period spanning April to July. This growth trajectory is notably subdued, primarily attributed to underwhelming performance in direct tax figures, which has effectively offset the relatively robust expansion in goods and services tax collections and Customs duties.
However, a deeper examination reveals an intricate web of fiscal intricacies. The net tax revenue has contracted by a significant 12.6 percent, amounting to Rs 5.8 trillion up to July. This constriction is partly attributed to the increased tax devolution to states during this period.
Unpacking these numbers, corporate tax collections have subsided, standing at Rs 1.76 trillion, marking a decline compared to the previous year. Conversely, personal income-tax collections, totaling Rs 2.57 trillion, and central goods and services tax collections, totaling Rs 2.73 trillion, have exhibited growth compared to the corresponding period in the previous year. Meanwhile, Union excise duty collections for the initial four months of the current fiscal year (2023-24) reached Rs 76,200 crore, falling short of the Rs 85,147 crore collected during the same period in the preceding year.
The fiscal discourse extends to the realm of revenue deficit, characterized by the chasm between revenue receipts and revenue spending, which has manifested at Rs 3 trillion as of July. This figure translates to 35 percent of the full-year target.
The intricate tapestry of India’s fiscal performance in FY24 also encompasses the widening of the fiscal deficit. As of the first four months of FY24, which extends through July, India’s fiscal deficit has burgeoned to Rs 6.06 trillion, encompassing 33.9 percent of the full-year target amounting to Rs 17.87 trillion. This expansion is primarily attributed to the acceleration of tax devolution and increased expenditure.
A comparative lens reveals a stark shift from the fiscal dynamics witnessed during April-July 2022, where the fiscal deficit stood at Rs 3.4 trillion, or 20.5 percent of the Budget Estimates (BE). The financial landscape has undergone a seismic transformation, with the fiscal deficit for April-July witnessing an astounding surge of 78 percent compared to the same period the previous year. The July figures bear a substantial responsibility for this financial shift, reflecting a deficit of Rs 1.54 trillion, a stark contrast to the surplus of Rs 11,040 crore reported in the preceding fiscal year.
Seeking solace in this labyrinthine fiscal narrative, non-tax revenues have emerged as a silver lining, doubling during the period to Rs 1.79 trillion, primarily bolstered by the substantial dividend payout from the Reserve Bank of India. Furthermore, capital expenditure has exhibited a notable rise, reaching Rs 3.17 trillion, marking a 52 percent increase, aligning with the government’s fervent push for economic growth.
As the fiscal odyssey unfolds, the trajectory of central tax devolution has demonstrated a noteworthy shift. The period of April-July in FY24 witnessed a substantial increase in central tax devolution, reaching Rs 3.1 trillion, compared to Rs 2 trillion during the same period in FY23. This alteration has contributed to the year-on-year contraction in net tax revenues.
In summation, the fiscal deficit persists on its trajectory, notwithstanding the nuances of weakened government finances, in its quest to align with the targeted 5.9 percent of gross domestic product for FY24. The labyrinthine fiscal dynamics continue to unfold, guided by intricate fiscal principles, policy imperatives, and the intricate dance between revenue and expenditure. The ensuing months will bear witness to the ongoing fiscal narrative, as India endeavors to navigate the complex terrain of fiscal consolidation.
