Opinion Express View on CGA data: Stay the course

On Wednesday, data released by the Controller General of Accounts showed that the central government’s fiscal position in the just concluded financial year (2022-23) was broadly in line with the revised estimates laid out in the Union budget. On the revenue side, the government’s tax and non-tax revenues actually ended up being slightly higher than what the revised estimates had envisaged, though it did once again fail to meet its disinvestment target. On the expenditure side, while the Centre cut back marginally on revenue expenditure, it maintained its commitment to enhancing capital expenditure, with actual spending slightly exceeding what it had earlier projected. As a consequence of this prudent fiscal management, the Union government was able to contain its fiscal deficit, keeping it in line with what it had earlier projected in the revised estimates.

At the aggregate level, the Centre’s gross tax collections grew at a healthy 12.7 per cent in 2022-23. However, while this is in line with the budget expectations, it is lower than the nominal GDP growth. The disaggregated data shows that growth in direct tax collections far outstripped revenue from indirect taxes. Direct taxes grew at almost 18 per cent, more than the increase in nominal GDP, with both corporate and personal income tax collections registering healthy growth. On the other hand, indirect tax growth was just 7.2 per cent, in part due to lower excise collections. And while the government’s non-tax collections exceeded expectations, as income from dividends surpassed targets, its disinvestment proceeds (including proceeds from monetisation of highways) were again short of expectations. As against a target of Rs 60,000 crore, actual collections were Rs 46,034 crore. On the expenditure side, the Centre’s capital expenditure grew by 24 per cent, driven by outlays on roads and railways. And while the fertiliser subsidy was higher than budgeted, it was offset by lowering spending in other areas such as the food subsidy.

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Soumya Kanti Ghosh writes | Latest GDP data: Only the pessimists are surprised

The outlook for the ongoing fiscal year is uncertain. The budget has assumed a nominal GDP growth of 10.5 per cent. It expects gross tax collections to grow at a similar pace. In real terms, the RBI expects the economy to grow at 6.5 per cent. However, other analysts are less sanguine about the prospects of the economy. While the likelihood of fiscal slippage is low currently, if growth turns out to be below the budget’s expectations, it might complicate the fiscal math. The finance minister has said that the aim is to bring down the fiscal deficit to below 4.5 per cent of GDP by 2025-26. The government must stick to the path of fiscal consolidation, and resist the urge to deviate in the run-up to the elections next year.