The centre’s fiscal deficit hit a four-year low of Rs 5.26 lakh crore, or 35% of the budget estimates, at the end of the first half of FY22, helped by buoyant tax revenues.

At the same stage last year the fiscal deficit was Rs 9.1 lakh crore or 114.8% of budget estimates.

The government managed to collect over 60% of the budgeted revenue receipts in the first six months of the fiscal ending September, data released Friday showed, the highest ever H1 collection.

The comfortable government finances are expected to keep bond yields soft and allow the government spending freedom to support the economic recovery.

Revenues almost doubled to Rs 10.8 lakh crore in the first six months from Rs 5.5 lakh crore last fiscal, outpacing the 10% rise in expenditure, helping compress the fiscal deficit. The first half fiscal deficit current fiscal is even lower than the Rs. 6.5 lakh crore in the pre-covid period of H1 FY2020.

“Despite a waning of the favourable base, the government of India’s gross tax revenues recorded a substantial 50% growth in September 2021, benefitting from robust advance taxes amid a formalisation of the economy,” said Aditi Nayar, chief economist, ICRA.

Tax receipts stood at Rs 9.2 lakh crore or 60% of BE and non-tax receipts at Rs 1.6 lakh crore or 66% of BE.

Nayar said with the corporation tax, Central goods and services tax, customs and excise duty collections exceeding 50% of the FY2022 BE in H1 FY2022, and the likelihood that rising vaccinations will boost confidence and spending in H2 FY2022, gross tax revenues could exceed the FY2022 Budget Estimate (BE) by at least Rs 2 lakh crore. “A healthy revenue collection is slowly giving the government the elbow room to increase spending by increasing expenditure,” said D K Pant and Paras Jasrai of India Ratings.

The revenue expenditure in 1HFY22 has grown 6.33% compared to FY21 and 7.35% against to FY20. It stood at Rs 13.96 lakh crore or 47.7% of BE. Capex also climbed up to Rs 2.29 lakh crore or 41.4% of BE. Total expenditure stood at Rs 16.26 lakh crore or 46.7% of BE.

“The government is still maintaining an INR1.81 trillion surplus cash balance with RBI at end-September 2021 (end-March 2021: INR1.82 trillion). With such a huge cash surplus with the RBI, the government is on a strong wicket to either improve expenditure or reduce market borrowing,” said Pant and Jasrai.

“We expect the GoI’s fiscal deficit to print at Rs. 13.8-14.8 trillion or 6.0-6.5% of GDP in FY2022, as compared to the budgeted Rs. 15.1 trillion,” Nayar said.