Gross tax collections expanded by a healthy 16% YoY in H1 FY2024
Aditi Nayar,
Chief Economist,
Head, Research & Outreach,
ICRA Ltd
Mumbai, 30 October, 2023: "The Government of India's fiscal deficit rose to Rs7 trillion or 39% of the FY2024 BE in H1 FY2024 from Rs6.2 trillion (tn) in H1 FY2023, amidst an upfronting of tax devolution (to Rs. 4.6 trillion from Rs. 3.8 trillion). While net tax revenues rose by 15%, non tax revenues expanded by 50% on the back of the RBI dividend, amidst a 10% growth in revenue expenditure, and a significant 43% YoY expansion in capex.
The Government of India's gross tax collections expanded by a healthy 16% YoY in H1 FY2024, boosted by the YoY uptick in flows in August-September 2023, led by direct taxes. With a 27% rise in corporation tax collections in September 2023 amidst healthy advance tax inflows, nearly 49% of the FY2024 BE had been collected, which is an encouraging trend. Moreover, half the personal income tax target of FY2024 BE had been achieved in H1 FY2024.
While tax devolution in September 2023 was in line with the previous month, it was 25% higher than the year-ago level. To meet the FY2024 BE, the GoI has to release Rs5.66 trillion to the states in the next six months, which is nearly the same as the amount devolved in Oct-March in FY2023 as per ICRA's calculations (Rs. 5.72 trillion).
Higher than budgeted dividend surplus transfer of Rs874.2 billion from the RBI is likely to provide some cushion to meet any undershooting in other revenues streams including disinvestment or potential overshooting in expenses, relative to respective BE, such as MGNREGA and LPG subsidy.
Revenue expenditure declined by 4% to Rs. 3.3 trillion in the month of September 2023, whereas capex expanded by 29% to Rs. 1.2 trillion, the highest in any month in H1 FY2024. With this, 49% of the FY2024 BE capex target had been achieved, which is favourable in light of the potential slowdown closer to the Parliamentary elections."
Pickup In Rainfall Expectedly Flattened Core Sector Expansion
A pickup in rainfall expectedly flattened the core sector expansion in September 2023 to a four-month low of 8.1% from 12.5% in August 2023, amid the slowdown in growth of seven of the eight constituent sectors barring fertiliser output.
While coal output expanded by double-digits for the third consecutive month in September 2023, steel production and electricity generation posted a robust growth of ~9-10% in the month. The YoY growth in cement production decelerated sharply to six-month low of 4.7% in September 2023, while crude oil production reverted to a contraction after a gap of two months.
The IIP growth is likely to moderate to high single digits in September 2023, taking a cue from the core sector's trajectory.
