Government Spending Declines 2.2% YoY In July’22

Total government expenditure contracted for the first time in FY23, down 2.2% YoY in Jul'22 as against a growth of 5.4% YoY in Jun'22, Motilal Oswal Financial Services has said in a report.

"The decline was on account of a 12.4% YoY fall in revenue spending by the government, while capex nearly doubled YoY in Jul'22, it has noted. Therefore, total government spending over Apr-July'22 touched Rs 11.3 trillion (29% of FY23BE), a growth of 12.2% YoY as compared to a 15.4% YoY growth in 1QFY23. The pace of spending (INR10t, ~29% of FY22BE), however, is similar to FY22," the firm has said in its report.

Total receipts of the Center grew at a 10-month high of 40% YoY in Jul'22 on account of strong growth in both tax and non-tax revenue. Within direct tax, both corporate and personal income taxes grew sharply in Jul'22. Therefore, total receipts of the government grew 15% YoY to INR7.9t (34.4% of FY23BE, similar to last year).

"Overall, the pace of government expenditure (v/s its FY23 aim) seems slower than government receipts in 4MFY23. Our analysis suggests that the government may overshoot its total receipts target by just a notch and meet its expenditure target (provided no additional expenditure is announced throughout the fiscal) in FY23. If so, we may see a lower fiscal deficit of 6.2% of GDP in FY23E, instead of the government budgeted (FY23BE) deficit of 6.4% of GDP," Motilal Oswal has said in its report.