Fiscal Deficit Touches 33.9% Of Full-Year Target At End-July: CGA Data

Relevance: GS3 - Indian Economy and issues relating to planning, mobilization, of resources, growth, development

(Source: The Hindu, 09/01/2023)

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Why in the news?

• Recently, the Centre's fiscal deficit for the initial four months of the fiscal year 2023-24 reached 33.9 percent of the annual target.
• According to the data, issued by the Controller General of Accounts (CGA), the fiscal deficit stood at Rs 6.06 lakh crore against the budgeted estimate of Rs 17.86 lakh crore for the current fiscal.
• In the corresponding period of the previous fiscal year 2022-23, the fiscal deficit had accounted for 20.5% of the Budget Estimates (BE).

Fiscal Deficit Projection in the Union Budget

• In the Union Budget, the government had outlined its intention to reduce the fiscal deficit to 5.9% of the gross domestic product (GDP) during the ongoing financial year 2023-24.
• This effort follows the prior year's fiscal deficit of 6.4% of the GDP, which was a reduction from the earlier estimate of 6.71%.

Revenue-Expenditure Data for April-July 2023-24

• Net Tax Revenue Collection
  • The revenue-expenditure data for the period between April and July 2023-24 indicated that the net tax revenue amounted to Rs 5.83 lakh crore, constituting 25% of the Budget Estimates for the current fiscal.
  • In comparison, net tax revenue collection had reached 34.4% by the end of July 2022.
• Total Expenditure
  • During the first four months, the central government's total expenditure stood at Rs 13.81 lakh crore, equivalent to 30.7% of the Budget Estimates.
  • This figure surpasses the expenditure of 28.6% of the Budget Estimates during the corresponding period of the previous year.

What is Fiscal Deficit?

• Fiscal deficit is a crucial financial indicator that reveals the gap between the government's total expenditure and its total revenue.
• It represents the amount of money that the government needs to borrow to cover this gap.
• Calculation:
• Fiscal Deficit = Total Expenditure (Revenue Exp + Capital Exp) – (Revenue Receipts + Loan Recoveries + Other Capital Receipts except loans borrowed)
• The fiscal deficit is a significant parameter as it indicates the government's borrowing needs to meet its financial obligations and development initiatives.

Importance of Fiscal Deficit

• The fiscal deficit provides insights into the financial health of the government and its ability to manage its expenses.
• A higher fiscal deficit might indicate that the government is relying heavily on borrowing to finance its operations, which can have implications for the economy, inflation, and overall fiscal stability.

*For detailed notes on Fiscal Deficit, click here

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FAQs

MCQ

Question: Consider the following statements: (UPSC 2018)

1. The Fiscal Responsibility and Budget Management (FRBM) Review Committee Report has recommended a debt-to-GDP ratio of 60% for the general (combined) government by 2023, comprising 40% for the Central Government and 20% for the State Governments.
2. The Central Government has domestic liabilities of 21% of GDP as compared to that of war of GDP of the State 2 Governments.
3. As per the Constitution of India, it is mandatory for a State to take the Central Government’s consent for raising any loan if the former owes any outstanding liabilities to the latter.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3