Apr-feb fiscal deficit at 86.5% of FY24 aim, net tax revenue falls in Feb

INDIA’S FISCAL deficit during April-february stood at Rs 15.01 lakh crore or 86.5 per cent of the full-year revised target of Rs 17.34 lakh crore, data released by the Controller General of Accounts (CGA) showed on Thursday. Net tax revenue turned negative during February primarily on account of a contraction in corporate tax revenue and due to the impact of transfer of tax devolution instalments to states, economists said.

Net tax revenue during February stood at Rs (-) 30,388 crore as against Rs 43,483 crore in the year-ago period. Cumulatively, during Aprilfebruary 2023-24, net tax revenue stood at Rs 18.49 lakh crore as against Rs 17.32 lakh crore in April-february 2022-23. Corporate tax receipts slipped into negative in February to (-) Rs 2,851 crore as against Rs 33,898 crore in January and Rs 12,831 crore in February last year on account of a likely rise in refunds.

“The gross tax revenue of the union government grew at a robust 13.4% YOY during 11 months of FY24. This was supported by an income tax growth of 25.8% YOY and corporate taxes 17.3% YOY. However, centre’s net tax collections grew just 6.8% YOY during 11 months of FY24 which is at a four-year low, due to higher growth in transfers to the states. The tax devolution to the states was up 27.9% YOY during 11 months of FY24,” Paras Jasrai, Senior Analyst, India Ratings and Research said.

The union government had given two additional transfers to the states during February 2024. Two instalments of tax devolution amounting Rs 1.42 lakh crore were released to states in February. With the latest release of funds, the Centre has released Rs10.32 lakh crore, leaving just Rs 68,000 crore to be released later in March. On the expenditure front, even though revenue expenditure has been compressed significantly, economists said the quality of deficit( ratio of revenue to fiscal deficit) is significantly better this fiscal as it stood at 48.7 per cent during 11 months of FY24 (record-low) and suggests that majority of the borrowing has been used for capex.