Is it true that the Indian government is facing a slower growth in revenues in the first quarter of the year?

For the quarter ended June 2022, the total revenue receipts of the Indian government increased by just about 5% to Rs5.70 trillion. There were two reasons for the same. Firslty, the surplus transferred by the RBI to the Union government fell to almost one-third of last year. On the other hand, the collection of Union excise duty and customs duty contracted during the period. For the first quarter ended June 2022, the fiscal deficit was at 21.2% of the full year target, with the risk of spilling over due to higher inflation costs.

The RBI dividend transfer to the government for the current year was just Rs30,307 crore as compared to Rs99,122 crore in the previous year. This is likely to be a problem in a year when the government’s fertiliser and petroleum subsidies are likely to exceed the budget estimates due to higher commodity prices. For the first quarter of FY23, income tax and corporation tax grew at a robust rate of 40.7% and 30% respectively. The problems came with excise duty and customs duty which contracted -9.8% and -11.8% respectively.

The problemis that the expenditure for the June quarter was 24% higher due to higher capex in FY23. So there is a piquant situation wherein the inflows are static or negative but the outflows are robust. Government has also confirmed that it sticking with is capex plans to make up for the weak capex in the last 2 years. The capex target for FY23 is Rs7.5 trillion. One positive spill-off of the higher capex is the growth of various infrastructure sectors like steel and cement in Q1FY23. The windfall tax could have helped, but it is partiall rolled back.