Robust tax collection will help government meet fiscal deficit target: RBI

In the first half of 2023-24, the union government completed 61.8 per cent of the budgeted net market borrowings for 2023-24. The market borrowings were followed by the utilisation of the National Small Savings Fund (NSSF) for financing the GFD of the government which according to the RBI signals the confidence of attaining the fiscal deficit target of 5.9 per cent of the GDP.

“This is attributable to the Centre’s tax revenue that has been growing at a robust pace apart from the more than anticipated collections on the non-tax front,” the RBI said in the study on Wednesday.

On the other hand, the net market borrowings of the states during the first half of 2023-2024 witnessed a year-on-year decline of 23.1 per cent and accounted for only 24.8 per cent of their BE against 33.7 per cent of first half of 2022-2023, the RBI said.

According to the study, eight states had zero or negative net borrowing in the first half of 2023-24. Gross market borrowings, however, were 9 per cent higher than last year.  Net Market Borrowings Reserve Bank increased by 61.1 per cent (y-o-y) during the first half of 2023-24. “The average amount availed by the States under Ways and Means Advances (WMA), and Special Drawing Facility (SDF) increased by 14.9 per cent and 115.4 per cent, respectively, while the Overdraft (OD) availment declined by 15.8 per cent,” the RBI said.

Himachal Pradesh, Manipur, Mizoram and Nagaland decreased their daily utilisation of WMA in first half of 2023- 24 over the same period in the previous year. Gross market borrowings of the central government (as a proportion of GDP) declined steadily from 5.8 per cent in 2011-12 to around 3.6 per cent in 2016-17 as the government embarked on fiscal consolidation.