Government May Beat FY22 Fiscal Deficit Target, Says India Ratings

India is expected to report lower-than-targeted fiscal deficit in the ongoing fiscal 2021-22, aided by higher revenue, according to India Ratings and Research Pvt.

The government is set to report a fiscal deficit of 6.6% of the GDP in FY22, 20 basis points lower than the targeted 6.8%, the ratings firm said in a report.

Higher tax and non-tax revenue collections this fiscal are expected to more than offset the shortfall in divestment revenue, leading to the expected improvement, India Ratings said. “Tax collections so far have immensely benefited both from growth and inflation,” the report added.

The government is still 95% short of its divestment target of Rs 1.75 lakh crore with just three months left in the financial year and is banking on big-ticket deals including the initial public offering of the country’s largest insurer Life Insurance Corp. In contrast, other categories of non-tax revenues, such as the dividend from the Reserve Bank of India, has been higher than expected.

Overall, non-tax revenue is expected to come in higher at Rs 3.1 lakh crore against the budgeted Rs 2.4 lakh crore, India Ratings said.

On gross tax revenue collections, India Ratings expects FY22 collections to be Rs 5.9 lakh crore higher than the budgeted figure of Rs 22.17 lakh crore, with the share of corporation tax being 28.4%, income tax 16.3%, GST 14.7%, customs duty 14.2%, excise duty 22.4% and others 3.9%.

“The share of direct tax in the expected additional gross tax revenue collection works out to be 44.7% and that of indirect tax 55.3%. On the whole, the share of direct taxes in the gross tax revenue of FY22 is expected to increase to 48.9% in FY22 from 45.8% in FY21,” India Ratings said.

Net tax revenue in the first seven months of the fiscal stood at Rs 10.5 lakh crore or 68.1% of the budget estimate of Rs 15.45 lakh crore, compared to 35.2% in the last financial year.

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