How has India’s fiscal deficit shaped up as of the end of the first 8 months of the current fiscal year?

For the full financial year FY22, the government of India has estimated the fiscal deficit (also called the budget deficit) at 6.8% of GDP. That is nearly 10 bps lower than the original fiscal deficit estimate for FY22 at 6.9%. However, we have to await for the final details to be announced in the Union Budget to be announced on 01-February next year. The confidence for the government comes from the slow progression of fiscal deficit this current year.

Currently, data is not available till November but only till October. As of end Oct-21 the total fiscal deficit stood at Rs.547,000 crore or what is nearly 36.3% of the budget estimates. With just about 5 months to go, the probability of spillage on the downside are quite low. This improvement in the fiscal deficit is largely on account of better revenue collections. The revenues have improved on the direct taxes, indirect taxes and RBI transfers front.

If you compare the first seven months of the current fiscal year with the previous fiscal year, then India is substantially better off. For example, last year the fiscal deficit had touched 120% of full year target by end of Oct-20. However, that was an exceptional and extreme pandemic year. This fiscal, the centre has been helped along the way by higher than expected RBI transfers to government. GST collections crossed Rs.8 trillion in 7 months.