State’s fiscal deficit to stand at 3.6 percent in FY23

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Revising the outlook on state finances that to improving in FY23 to from neutral. India Ratings expects the aggregate fiscal deficit of the states to come in at 3.6% of their GDP from 3.5 % in FY22 on the back of robust revenue growth.

The agencies had earlier forecast the fiscal deficit of the states to print in at 4.1% in the upward revision is due to the better than expected growth in revenue receipts, higher growth in the nominal gross domestic product in FY22.

In the agency that estimates in the national nominal GDP to grow 17.6 %.this fiscal that higher than the previous estimate of 15.6 %.

The agency expects gross, net market borrowings by the states in FY22 to be lower than at Rs 6.6 lakh crore and Rs 4.6 lakh crore and then its previous estimate of Rs 8.2 lakh crore, Rs 6.2 lakh crore.

Gross, net market borrowings are estimated at Rs 7 lakh crore, Rs 4.63 lakh crore in FY23 due to an improvement in states aggregate revenue receipts, higher tax devolution from the Centre.

In the quality of the fiscal deficit and which is revenue deficit as a percentage of fiscal deficit that is likely to improve in FY22 and FY23. After deteriorating in the previous two fiscals of 2020, 2021 due to the impact of the pandemic on the state’s revenue receipts.

The analysis is based on the information on 26 states during this fiscal till November. The aggregate revenue receipts of these 26 states grew 25.1 % annualized to Rs 16.4 lakh crore.

From April to November revenue expenditure of these states grew only 12 %. Against the FY22 budget estimate of Rs 6.65 lakh crore.

The Centre has allocated a higher amount of Rs 7.45 lakh crore as the state’s share in central taxes in the revised estimate.

An economic recovery led to a pick-up in the own-revenue collection and combined with higher than budgeted tax devolution from the Centre.

It will moderate the state’s aggregate revenue deficit to 0.73 % from the previous estimate of 1.3 %in FY22. The agency explains adding it expects a marginally lower aggregate revenue deficit of 0.69%in FY23.

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