Mint Explainer: How does the government plan to meet its fiscal deficit target?

livemint.com:

₹6.43 trillion, or 36% of the annual estimates of ₹17.87 trillion, according to data released by the Controller General of Accounts. This was largely due to a sharp jump in capital expenditure, which was offset by lower tax devolution to state governments, and an increase in non-tax revenues, analysts said. In the year-ago period the fiscal deficit was at ₹5.42 trillion, or 32.6% of the FY23 target of ₹16.61 trillion.

Crude oil prices have risen from $80-82 a barrel in February 2023, during the announcement of the budget, to about $95 a barrel. With India being a net importer of oil, rising crude oil prices will increase expenditure. Meanwhile, the government is also unlikely to meet its divestment target of ₹510 billion during the fiscal.

The rising expenditure due to higher oil prices and lower-than-expected revenue from divestment present key challenges for the government to meet its fiscal deficit target of 5.9%. Despite rising expenses, a higher-than-budgeted dividend surplus transfer of ₹874.2 billion from the Reserve Bank of India (RBI) and higher dividends from public-sector banks are likely to provide some cushion. The higher dividends are due to higher interest rates.

The government also expects tax collections to remain buoyant in the coming quarters. While the central government's gross tax collections expanded by a healthy 17% annually in April-August 2023, with a near-doubling of flows on an annual basis on the back of higher direct taxes, its tax devolution to state governments in August 2023 was in line with the previous month, and lower in annual terms as a double tranche had been released in August 2022. Net tax revenues for August 2023 stood at ₹2.2 trillion, a multifold increase from ₹0.3 trillion in