Q1 What do numbers tell us about the Indian economy?

The fiscal deficit of the central government in the first quarter of April-June stood at 21.2% of the full-year target of Rs 16.6 lakh crore. This is lower than expected due to higher tax collection and lower expenditure on subsidies.

The deficit in the corresponding period of last year was 18.2% of the budget estimate of Rs 15.07 trillion for FY22. The government said it was sticking to the current fiscal deficit target of 6.4% of GDP for FY13.

Led by the ongoing economic recovery and improving GST compliance, net tax revenue in Q1 stood at Rs 5.06 trillion, which is 26.1% of the budget estimate as compared to 26.7% in the previous year.

On the expenditure side, government spending on key subsidies, including food and fertilisers, declined to around Rs 68,000 crore during the April-June period from around Rs 1 trillion a year ago.

At Rs 9.48 trillion, the total expenditure in Q1 was 24% of the budget size of Rs 39.4 trillion in FY23.

23.4% of the capital expenditure target of Rs 7.5 lakh crore was achieved in the first quarter. It was Rs 1.75 lakh crore as compared to Rs 1.11 lakh crore last year.

Meanwhile, on the economy side, India’s eight core infrastructure sectors grew in double digits in the April-June period.

The individual trends in core sector data are mixed, ranging from a muted growth of 0.6% for crude to a strong expansion of 31.2% for coal. In addition to crude oil, steel and natural gas displayed imports grew twice as fast, rising 47.4% to $187 billion. Single digit growth.

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Retail inflation averaged 7.3% during the quarter. For each of the three months, it has been above the RBI’s upper tolerance limit of 6%.

Both the current account deficit and the strengthening of the dollar weighed on the rupee, which has depreciated 4.4% so far this fiscal. The current account deficit is pegged at 3% of GDP in FY13 versus 1.2% in the previous fiscal.

As the RBI defended the rupee against volatility, India’s forex reserves declined from $606 billion in early April to $571.56 billion last week. India’s merchandise exports jumped 22.2% to $116.7 billion during the first quarter.

[Byte of Sunil Sinha, Principal Economist and Director (Public Finance), India Ratings and Research]

RBI surplus transfer, the lowest in a decade, halved non-tax revenue in Q1 which means revenue receipts grew at a weak 5% in Q1.

But going forward, stronger tax collections will help the government absorb revenue loss due to over budgeted subsidy expenditure and cut excise duty.

Therefore, experts say that the government will comfortably meet its fiscal deficit target for FY13.