Fiscal Developments 2022-23 | Indian Economy for UPSC CSE PDF Download

 Page 1


CHAPTER
03
Fiscal Developments: 
Revenue Relish
The Union Budget for FY23 was presented in an uncertain macroeconomic environment. 
Soon after its presentation, the geopolitical conflict aggravated global supply disruptions 
and adversely impacted the prices of fuel, food, and other essential commodities. The 
Government of India's fiscal policy response to the crisis comprised of a judicious mix 
of increasing food and fertiliser subsidies on the one hand and a reduction in taxes on 
fuel and certain imported products on the other. Despite these additional fiscal pressures 
during the year, the Union Government is on track to achieve the budget estimate for the 
fiscal deficit in FY23. The resilience in the fiscal performance of the Union Government 
has been facilitated by the recovery in economic activity, buoyancy in revenues from 
direct taxes and GST, and realistic assumptions in the Budget. The Gross Tax Revenue 
registered a YoY growth of 15.5 per cent from April to November 2022, driven by robust 
growth in the direct taxes and Goods and Services Tax (GST). The growth in direct taxes 
during the first eight months of the year was much higher than their corresponding 
longer-term averages. The GST has stabilised as a vital revenue source for central and 
state governments, with the gross GST collections increasing at 24.8 per cent on YoY basis 
during April - December 2022. 
On the expenditure side, the Union Government's emphasis on capital expenditure 
(Capex) has continued despite higher revenue expenditure requirements during the year. 
The Centre's Capex has steadily increased from a long-term average of 1.7 per cent of 
GDP (FY09 to FY20) to 2.5 per cent of GDP in FY22 P A. The Centre has also incentivised 
the State Governments through interest-free loans and enhanced borrowing ceilings to 
prioritise their spending on Capex. With an emphasis on infrastructure-intensive sectors 
like roads and highways, railways, and housing and urban affairs, the increase in Capex 
has large-scale positive implications for medium-term growth. This Capex-led growth 
strategy will enable India to keep the growth-interest rate differential positive, leading to 
a sustainable government debt to GDP in the medium run. 
Page 2


CHAPTER
03
Fiscal Developments: 
Revenue Relish
The Union Budget for FY23 was presented in an uncertain macroeconomic environment. 
Soon after its presentation, the geopolitical conflict aggravated global supply disruptions 
and adversely impacted the prices of fuel, food, and other essential commodities. The 
Government of India's fiscal policy response to the crisis comprised of a judicious mix 
of increasing food and fertiliser subsidies on the one hand and a reduction in taxes on 
fuel and certain imported products on the other. Despite these additional fiscal pressures 
during the year, the Union Government is on track to achieve the budget estimate for the 
fiscal deficit in FY23. The resilience in the fiscal performance of the Union Government 
has been facilitated by the recovery in economic activity, buoyancy in revenues from 
direct taxes and GST, and realistic assumptions in the Budget. The Gross Tax Revenue 
registered a YoY growth of 15.5 per cent from April to November 2022, driven by robust 
growth in the direct taxes and Goods and Services Tax (GST). The growth in direct taxes 
during the first eight months of the year was much higher than their corresponding 
longer-term averages. The GST has stabilised as a vital revenue source for central and 
state governments, with the gross GST collections increasing at 24.8 per cent on YoY basis 
during April - December 2022. 
On the expenditure side, the Union Government's emphasis on capital expenditure 
(Capex) has continued despite higher revenue expenditure requirements during the year. 
The Centre's Capex has steadily increased from a long-term average of 1.7 per cent of 
GDP (FY09 to FY20) to 2.5 per cent of GDP in FY22 P A. The Centre has also incentivised 
the State Governments through interest-free loans and enhanced borrowing ceilings to 
prioritise their spending on Capex. With an emphasis on infrastructure-intensive sectors 
like roads and highways, railways, and housing and urban affairs, the increase in Capex 
has large-scale positive implications for medium-term growth. This Capex-led growth 
strategy will enable India to keep the growth-interest rate differential positive, leading to 
a sustainable government debt to GDP in the medium run. 
42 Economic Survey 2022-23
introduction
3.1 With the continuing global risks and uncertainties, the availability of fiscal space with 
governments has become paramount. It is especially true following the recent incidence of the 
pandemic when the fiscal policy became an effective macroeconomic stabilisation tool globally. 
In India, particularly when all economic activities had reached a standstill, fiscal policy was 
instrumental in providing a safety net to the vulnerable, reviving the economy by boosting 
demand, and addressing certain domestic supply-side constraints through public investments 
and sustained structural reforms.
3.2 The large, frontloaded packages across the countries led to over-stimulation of demand, 
leading to its much faster recovery. In combination with the still-existing supply disruptions and 
constraints, the overheating of the economy led to inflationary pressures. The conflict in Europe 
and the related geopolitical developments aggravated the crisis. The slowing global growth, 
rising interest rates, persistently high inflation rates and uncertain global environment have thus 
posed certain pertinent questions for fiscal-policy experts to motivate the overarching fiscal 
policy strategy. How to evaluate the trade-off between maintaining fiscal support to manage 
the continuing crisis versus withdrawing fiscal stimulus from the economy to control inflation 
and regain the lost fiscal space? When to do so and at what pace? While a sudden withdrawal 
may have costs for medium-term growth, a slow withdrawal may be inflationary and hence put 
upward pressure on yields, making the debt costly. Moreover, the financial markets may have 
less tolerance for fiscal unorthodoxy in an era of rising interest rates
1
. 
3.3 Against this backdrop, the Government of India adopted a calibrated fiscal response to the 
pandemic and planned to withdraw the fiscal stimulus gradually as it moves along the glide path 
outlined in the Budget FY22. This chapter discusses the government's fiscal strategy amidst 
uncertain geopolitical developments. The chapter starts with a discussion of the performance of 
the Union Government's finances, followed by an overview of the State finances. It concludes 
with a commentary on India's debt profile.
Developments in union Government finances
3.4 While India entered the pandemic with a stretched fiscal position, the government's 
prudent and calibrated fiscal response enabled stable public finances even amidst the present 
uncertainties. The fiscal deficit of the Union Government, which reached 9.2 per cent of GDP 
during the pandemic year FY21, has moderated to 6.7 per cent of GDP in FY22 PA and is 
further budgeted to reach 6.4 per cent of GDP in FY23 (Figure III.1). This gradual decline in 
the Union government's fiscal deficit as a per cent of GDP, in line with the fiscal glide path 
envisioned by the government, is a result of careful fiscal management supported by buoyant 
revenue collection over the last two years.
1
‘Ruchir Sharma’s investor guide to 2023: from peak dollar to better TV’, Financial Times, 6th January 2023 (https://www.ft.com/con-
tent/3e040c2c-f7e4-4121-9dfe-7ba5732707f7)
Page 3


CHAPTER
03
Fiscal Developments: 
Revenue Relish
The Union Budget for FY23 was presented in an uncertain macroeconomic environment. 
Soon after its presentation, the geopolitical conflict aggravated global supply disruptions 
and adversely impacted the prices of fuel, food, and other essential commodities. The 
Government of India's fiscal policy response to the crisis comprised of a judicious mix 
of increasing food and fertiliser subsidies on the one hand and a reduction in taxes on 
fuel and certain imported products on the other. Despite these additional fiscal pressures 
during the year, the Union Government is on track to achieve the budget estimate for the 
fiscal deficit in FY23. The resilience in the fiscal performance of the Union Government 
has been facilitated by the recovery in economic activity, buoyancy in revenues from 
direct taxes and GST, and realistic assumptions in the Budget. The Gross Tax Revenue 
registered a YoY growth of 15.5 per cent from April to November 2022, driven by robust 
growth in the direct taxes and Goods and Services Tax (GST). The growth in direct taxes 
during the first eight months of the year was much higher than their corresponding 
longer-term averages. The GST has stabilised as a vital revenue source for central and 
state governments, with the gross GST collections increasing at 24.8 per cent on YoY basis 
during April - December 2022. 
On the expenditure side, the Union Government's emphasis on capital expenditure 
(Capex) has continued despite higher revenue expenditure requirements during the year. 
The Centre's Capex has steadily increased from a long-term average of 1.7 per cent of 
GDP (FY09 to FY20) to 2.5 per cent of GDP in FY22 P A. The Centre has also incentivised 
the State Governments through interest-free loans and enhanced borrowing ceilings to 
prioritise their spending on Capex. With an emphasis on infrastructure-intensive sectors 
like roads and highways, railways, and housing and urban affairs, the increase in Capex 
has large-scale positive implications for medium-term growth. This Capex-led growth 
strategy will enable India to keep the growth-interest rate differential positive, leading to 
a sustainable government debt to GDP in the medium run. 
42 Economic Survey 2022-23
introduction
3.1 With the continuing global risks and uncertainties, the availability of fiscal space with 
governments has become paramount. It is especially true following the recent incidence of the 
pandemic when the fiscal policy became an effective macroeconomic stabilisation tool globally. 
In India, particularly when all economic activities had reached a standstill, fiscal policy was 
instrumental in providing a safety net to the vulnerable, reviving the economy by boosting 
demand, and addressing certain domestic supply-side constraints through public investments 
and sustained structural reforms.
3.2 The large, frontloaded packages across the countries led to over-stimulation of demand, 
leading to its much faster recovery. In combination with the still-existing supply disruptions and 
constraints, the overheating of the economy led to inflationary pressures. The conflict in Europe 
and the related geopolitical developments aggravated the crisis. The slowing global growth, 
rising interest rates, persistently high inflation rates and uncertain global environment have thus 
posed certain pertinent questions for fiscal-policy experts to motivate the overarching fiscal 
policy strategy. How to evaluate the trade-off between maintaining fiscal support to manage 
the continuing crisis versus withdrawing fiscal stimulus from the economy to control inflation 
and regain the lost fiscal space? When to do so and at what pace? While a sudden withdrawal 
may have costs for medium-term growth, a slow withdrawal may be inflationary and hence put 
upward pressure on yields, making the debt costly. Moreover, the financial markets may have 
less tolerance for fiscal unorthodoxy in an era of rising interest rates
1
. 
3.3 Against this backdrop, the Government of India adopted a calibrated fiscal response to the 
pandemic and planned to withdraw the fiscal stimulus gradually as it moves along the glide path 
outlined in the Budget FY22. This chapter discusses the government's fiscal strategy amidst 
uncertain geopolitical developments. The chapter starts with a discussion of the performance of 
the Union Government's finances, followed by an overview of the State finances. It concludes 
with a commentary on India's debt profile.
Developments in union Government finances
3.4 While India entered the pandemic with a stretched fiscal position, the government's 
prudent and calibrated fiscal response enabled stable public finances even amidst the present 
uncertainties. The fiscal deficit of the Union Government, which reached 9.2 per cent of GDP 
during the pandemic year FY21, has moderated to 6.7 per cent of GDP in FY22 PA and is 
further budgeted to reach 6.4 per cent of GDP in FY23 (Figure III.1). This gradual decline in 
the Union government's fiscal deficit as a per cent of GDP, in line with the fiscal glide path 
envisioned by the government, is a result of careful fiscal management supported by buoyant 
revenue collection over the last two years.
1
‘Ruchir Sharma’s investor guide to 2023: from peak dollar to better TV’, Financial Times, 6th January 2023 (https://www.ft.com/con-
tent/3e040c2c-f7e4-4121-9dfe-7ba5732707f7)
43 Fiscal Developments- Revenue Relish
Figure iii.1: t rends in union government 
deficits over the years- On the way to fiscal 
consolidation
Figure III.2: Government on track to achieve 
the Fiscal deficit target for FY23
104.6
46.2
58.9
Apr- Nov
(5 year Avg)
Apr- Nov
2021
Apr- Nov
2022
As a per cent of BE
3.5 3.4
4.7
9.2
6.7
6. 4
0.4 0.4
1.6
5.7
3.3
2.8
0
2
4
6
8
10
FY18 FY19 FY20 FY21 FY22
PA
FY23
BE
Per cent of GDP
 Fiscal Deficit Primary Deficit
Source: Union Budget documents, O/o CGA        Source: O/o CGA 
Union Government on track to achieve the Fiscal deficit target for FY23
3.5 The Union Budget for FY23 was presented in a recovering yet uncertain macroeconomic 
environment, not anticipating the geopolitical developments that unfolded during the year. As the 
conflict in Europe broke out early in the year, it aggravated supply disruptions and had an adverse 
impact on the prices of fuel, food, and other essential commodities. The government's fiscal 
policy response necessitated additional spending on food and fertiliser subsidies, accompanied 
by specific duty cuts to control the pass-through of the high imported prices to the consumers/
users. Despite additional fiscal resource pressures during the year, the Union Government is 
well on track to achieve the budget estimate for the fiscal deficit in FY23. The fiscal deficit of 
the Union Government at the end of November 2022 stood at 58.9 per cent of the BE, lower than 
the five-year moving average of 104.6 per cent of BE during the same period (Figure III.2).
Conservative budget assumptions provide a buffer during global uncertainties.
3.6 This resilience in the fiscal performance of the Centre has resulted due to a recovery in 
economic activity, buoyancy in revenues observed during the year, and conservative assumptions 
of macroeconomic variables in the Budget. The prudent assumptions in Budget FY23 provided a 
buffer to the government during global uncertainties. As an illustration, the Gross Tax Revenue 
(GTR) to the Centre was envisaged to grow at 9.6 per cent in FY23 BE relative to FY22 RE. 
However, given the higher 'Provisional Actual' figures recorded for the GTR relative to the 
Revised estimates in FY22, the growth in GTR of FY23 BE turns out to be a mere 1.8 per cent 
over FY22 PA. Against this implicit (budgeted) growth, the data of the first eight months of the 
year show that GTR has grown at a much higher rate (Table III.1). The annual estimate of GTR 
for FY23 is thus expected to overshoot the budget estimates.
Page 4


CHAPTER
03
Fiscal Developments: 
Revenue Relish
The Union Budget for FY23 was presented in an uncertain macroeconomic environment. 
Soon after its presentation, the geopolitical conflict aggravated global supply disruptions 
and adversely impacted the prices of fuel, food, and other essential commodities. The 
Government of India's fiscal policy response to the crisis comprised of a judicious mix 
of increasing food and fertiliser subsidies on the one hand and a reduction in taxes on 
fuel and certain imported products on the other. Despite these additional fiscal pressures 
during the year, the Union Government is on track to achieve the budget estimate for the 
fiscal deficit in FY23. The resilience in the fiscal performance of the Union Government 
has been facilitated by the recovery in economic activity, buoyancy in revenues from 
direct taxes and GST, and realistic assumptions in the Budget. The Gross Tax Revenue 
registered a YoY growth of 15.5 per cent from April to November 2022, driven by robust 
growth in the direct taxes and Goods and Services Tax (GST). The growth in direct taxes 
during the first eight months of the year was much higher than their corresponding 
longer-term averages. The GST has stabilised as a vital revenue source for central and 
state governments, with the gross GST collections increasing at 24.8 per cent on YoY basis 
during April - December 2022. 
On the expenditure side, the Union Government's emphasis on capital expenditure 
(Capex) has continued despite higher revenue expenditure requirements during the year. 
The Centre's Capex has steadily increased from a long-term average of 1.7 per cent of 
GDP (FY09 to FY20) to 2.5 per cent of GDP in FY22 P A. The Centre has also incentivised 
the State Governments through interest-free loans and enhanced borrowing ceilings to 
prioritise their spending on Capex. With an emphasis on infrastructure-intensive sectors 
like roads and highways, railways, and housing and urban affairs, the increase in Capex 
has large-scale positive implications for medium-term growth. This Capex-led growth 
strategy will enable India to keep the growth-interest rate differential positive, leading to 
a sustainable government debt to GDP in the medium run. 
42 Economic Survey 2022-23
introduction
3.1 With the continuing global risks and uncertainties, the availability of fiscal space with 
governments has become paramount. It is especially true following the recent incidence of the 
pandemic when the fiscal policy became an effective macroeconomic stabilisation tool globally. 
In India, particularly when all economic activities had reached a standstill, fiscal policy was 
instrumental in providing a safety net to the vulnerable, reviving the economy by boosting 
demand, and addressing certain domestic supply-side constraints through public investments 
and sustained structural reforms.
3.2 The large, frontloaded packages across the countries led to over-stimulation of demand, 
leading to its much faster recovery. In combination with the still-existing supply disruptions and 
constraints, the overheating of the economy led to inflationary pressures. The conflict in Europe 
and the related geopolitical developments aggravated the crisis. The slowing global growth, 
rising interest rates, persistently high inflation rates and uncertain global environment have thus 
posed certain pertinent questions for fiscal-policy experts to motivate the overarching fiscal 
policy strategy. How to evaluate the trade-off between maintaining fiscal support to manage 
the continuing crisis versus withdrawing fiscal stimulus from the economy to control inflation 
and regain the lost fiscal space? When to do so and at what pace? While a sudden withdrawal 
may have costs for medium-term growth, a slow withdrawal may be inflationary and hence put 
upward pressure on yields, making the debt costly. Moreover, the financial markets may have 
less tolerance for fiscal unorthodoxy in an era of rising interest rates
1
. 
3.3 Against this backdrop, the Government of India adopted a calibrated fiscal response to the 
pandemic and planned to withdraw the fiscal stimulus gradually as it moves along the glide path 
outlined in the Budget FY22. This chapter discusses the government's fiscal strategy amidst 
uncertain geopolitical developments. The chapter starts with a discussion of the performance of 
the Union Government's finances, followed by an overview of the State finances. It concludes 
with a commentary on India's debt profile.
Developments in union Government finances
3.4 While India entered the pandemic with a stretched fiscal position, the government's 
prudent and calibrated fiscal response enabled stable public finances even amidst the present 
uncertainties. The fiscal deficit of the Union Government, which reached 9.2 per cent of GDP 
during the pandemic year FY21, has moderated to 6.7 per cent of GDP in FY22 PA and is 
further budgeted to reach 6.4 per cent of GDP in FY23 (Figure III.1). This gradual decline in 
the Union government's fiscal deficit as a per cent of GDP, in line with the fiscal glide path 
envisioned by the government, is a result of careful fiscal management supported by buoyant 
revenue collection over the last two years.
1
‘Ruchir Sharma’s investor guide to 2023: from peak dollar to better TV’, Financial Times, 6th January 2023 (https://www.ft.com/con-
tent/3e040c2c-f7e4-4121-9dfe-7ba5732707f7)
43 Fiscal Developments- Revenue Relish
Figure iii.1: t rends in union government 
deficits over the years- On the way to fiscal 
consolidation
Figure III.2: Government on track to achieve 
the Fiscal deficit target for FY23
104.6
46.2
58.9
Apr- Nov
(5 year Avg)
Apr- Nov
2021
Apr- Nov
2022
As a per cent of BE
3.5 3.4
4.7
9.2
6.7
6. 4
0.4 0.4
1.6
5.7
3.3
2.8
0
2
4
6
8
10
FY18 FY19 FY20 FY21 FY22
PA
FY23
BE
Per cent of GDP
 Fiscal Deficit Primary Deficit
Source: Union Budget documents, O/o CGA        Source: O/o CGA 
Union Government on track to achieve the Fiscal deficit target for FY23
3.5 The Union Budget for FY23 was presented in a recovering yet uncertain macroeconomic 
environment, not anticipating the geopolitical developments that unfolded during the year. As the 
conflict in Europe broke out early in the year, it aggravated supply disruptions and had an adverse 
impact on the prices of fuel, food, and other essential commodities. The government's fiscal 
policy response necessitated additional spending on food and fertiliser subsidies, accompanied 
by specific duty cuts to control the pass-through of the high imported prices to the consumers/
users. Despite additional fiscal resource pressures during the year, the Union Government is 
well on track to achieve the budget estimate for the fiscal deficit in FY23. The fiscal deficit of 
the Union Government at the end of November 2022 stood at 58.9 per cent of the BE, lower than 
the five-year moving average of 104.6 per cent of BE during the same period (Figure III.2).
Conservative budget assumptions provide a buffer during global uncertainties.
3.6 This resilience in the fiscal performance of the Centre has resulted due to a recovery in 
economic activity, buoyancy in revenues observed during the year, and conservative assumptions 
of macroeconomic variables in the Budget. The prudent assumptions in Budget FY23 provided a 
buffer to the government during global uncertainties. As an illustration, the Gross Tax Revenue 
(GTR) to the Centre was envisaged to grow at 9.6 per cent in FY23 BE relative to FY22 RE. 
However, given the higher 'Provisional Actual' figures recorded for the GTR relative to the 
Revised estimates in FY22, the growth in GTR of FY23 BE turns out to be a mere 1.8 per cent 
over FY22 PA. Against this implicit (budgeted) growth, the data of the first eight months of the 
year show that GTR has grown at a much higher rate (Table III.1). The annual estimate of GTR 
for FY23 is thus expected to overshoot the budget estimates.
44 Economic Survey 2022-23
Table: III.1: Stable performance of the Union Government fiscal indicators from April to 
november 2022
? lakh crore as a per cent of Be YoY growth (per cent)
BE FY23
Apr-Nov 
2021
Apr-Nov 
2022
Apr-Nov 
2021
Apr-Nov 
2022
5 yr Avg 
Apr-Nov 
Apr-Nov 
2021
Apr-Nov 
2022
Revenue Receipts 22.04 13.58 14.23 75.9 64.6 12.3 67.1 4.8
Gross tax revenue 27.58 15.42 17.81 69.5 64.6 13.9 50.3 15.5
Assignment to 
States
8.17 4.03 5.51 60.5 67.5 16.6 20.4 36.8
Tax Revenue (net 
to Centre)
19.35 11.35 12.25 73.5 63.3 12.9 64.9 7.9
Non-Tax Revenue 2.70 2.23 1.98 91.8 73.5 13.3 79.5 -11.1
Non-Debt Capital 
Receipts 
0.79 0.21 0.41 11.0 52.3 30.6 14.1 100.4
Non-Debt receipts 22.84 13.79 14.65 69.8 64.1 12.2 66.0 6.2
Total Expenditure 39.45 20.75 24.43 59.6 61.9 11.4 8.8 17.7
Revenue 
Expenditure
31.95 18.01 19.96 61.5 62.5 11.4 8.2 10.8
Capital   
Expenditure
7.50 2.74 4.47 49.4 59.6 12.9 13.5 63.4
Revenue Deficit 9.90 4.43 5.73 38.8 57.8 11.4 -48.1 29.3
Fiscal Deficit 16.61 6.96 9.78 46.2 58.9 11.5 -35.3 40.6
Primary Deficit 7.21 2.34 4.33 33.5 60.1 13.1 -66.2 85.1
Source: Union Budget documents, O/o CGA 
Performance of Union Government Non-debt Receipts
3.7 The Union government's non-debt receipts comprise revenue receipts (tax and non-tax) 
and non-debt capital receipts. The shortfall in the non-debt receipts to meet the expenditure 
requirement is met by borrowings of the government (called fiscal deficit). This section evaluates 
the performance of the Receipts side of the Union Government's finances.
Sustained revenue buoyancy over the last two years
3.8 After plummeting during the pandemic-affected year FY21, revenue receipts registered 
robust growth in FY22 PA, both on a YoY basis and to the pre-pandemic year FY20  
(Annexe 1: Table 3). This revenue revival was attributed to a rebound in the collection of all 
major direct and indirect taxes (except excise duties) in FY22. Last year's revenue buoyancy 
momentum is continuing into the current year. The Gross Tax Revenue registered a YoY growth 
of 15.5 per cent from April to November 2022, and the Net Tax Revenue to the Centre after the 
assignment to states grew by 7.9 per cent on a YoY basis (Table III.1, III.2). 
Page 5


CHAPTER
03
Fiscal Developments: 
Revenue Relish
The Union Budget for FY23 was presented in an uncertain macroeconomic environment. 
Soon after its presentation, the geopolitical conflict aggravated global supply disruptions 
and adversely impacted the prices of fuel, food, and other essential commodities. The 
Government of India's fiscal policy response to the crisis comprised of a judicious mix 
of increasing food and fertiliser subsidies on the one hand and a reduction in taxes on 
fuel and certain imported products on the other. Despite these additional fiscal pressures 
during the year, the Union Government is on track to achieve the budget estimate for the 
fiscal deficit in FY23. The resilience in the fiscal performance of the Union Government 
has been facilitated by the recovery in economic activity, buoyancy in revenues from 
direct taxes and GST, and realistic assumptions in the Budget. The Gross Tax Revenue 
registered a YoY growth of 15.5 per cent from April to November 2022, driven by robust 
growth in the direct taxes and Goods and Services Tax (GST). The growth in direct taxes 
during the first eight months of the year was much higher than their corresponding 
longer-term averages. The GST has stabilised as a vital revenue source for central and 
state governments, with the gross GST collections increasing at 24.8 per cent on YoY basis 
during April - December 2022. 
On the expenditure side, the Union Government's emphasis on capital expenditure 
(Capex) has continued despite higher revenue expenditure requirements during the year. 
The Centre's Capex has steadily increased from a long-term average of 1.7 per cent of 
GDP (FY09 to FY20) to 2.5 per cent of GDP in FY22 P A. The Centre has also incentivised 
the State Governments through interest-free loans and enhanced borrowing ceilings to 
prioritise their spending on Capex. With an emphasis on infrastructure-intensive sectors 
like roads and highways, railways, and housing and urban affairs, the increase in Capex 
has large-scale positive implications for medium-term growth. This Capex-led growth 
strategy will enable India to keep the growth-interest rate differential positive, leading to 
a sustainable government debt to GDP in the medium run. 
42 Economic Survey 2022-23
introduction
3.1 With the continuing global risks and uncertainties, the availability of fiscal space with 
governments has become paramount. It is especially true following the recent incidence of the 
pandemic when the fiscal policy became an effective macroeconomic stabilisation tool globally. 
In India, particularly when all economic activities had reached a standstill, fiscal policy was 
instrumental in providing a safety net to the vulnerable, reviving the economy by boosting 
demand, and addressing certain domestic supply-side constraints through public investments 
and sustained structural reforms.
3.2 The large, frontloaded packages across the countries led to over-stimulation of demand, 
leading to its much faster recovery. In combination with the still-existing supply disruptions and 
constraints, the overheating of the economy led to inflationary pressures. The conflict in Europe 
and the related geopolitical developments aggravated the crisis. The slowing global growth, 
rising interest rates, persistently high inflation rates and uncertain global environment have thus 
posed certain pertinent questions for fiscal-policy experts to motivate the overarching fiscal 
policy strategy. How to evaluate the trade-off between maintaining fiscal support to manage 
the continuing crisis versus withdrawing fiscal stimulus from the economy to control inflation 
and regain the lost fiscal space? When to do so and at what pace? While a sudden withdrawal 
may have costs for medium-term growth, a slow withdrawal may be inflationary and hence put 
upward pressure on yields, making the debt costly. Moreover, the financial markets may have 
less tolerance for fiscal unorthodoxy in an era of rising interest rates
1
. 
3.3 Against this backdrop, the Government of India adopted a calibrated fiscal response to the 
pandemic and planned to withdraw the fiscal stimulus gradually as it moves along the glide path 
outlined in the Budget FY22. This chapter discusses the government's fiscal strategy amidst 
uncertain geopolitical developments. The chapter starts with a discussion of the performance of 
the Union Government's finances, followed by an overview of the State finances. It concludes 
with a commentary on India's debt profile.
Developments in union Government finances
3.4 While India entered the pandemic with a stretched fiscal position, the government's 
prudent and calibrated fiscal response enabled stable public finances even amidst the present 
uncertainties. The fiscal deficit of the Union Government, which reached 9.2 per cent of GDP 
during the pandemic year FY21, has moderated to 6.7 per cent of GDP in FY22 PA and is 
further budgeted to reach 6.4 per cent of GDP in FY23 (Figure III.1). This gradual decline in 
the Union government's fiscal deficit as a per cent of GDP, in line with the fiscal glide path 
envisioned by the government, is a result of careful fiscal management supported by buoyant 
revenue collection over the last two years.
1
‘Ruchir Sharma’s investor guide to 2023: from peak dollar to better TV’, Financial Times, 6th January 2023 (https://www.ft.com/con-
tent/3e040c2c-f7e4-4121-9dfe-7ba5732707f7)
43 Fiscal Developments- Revenue Relish
Figure iii.1: t rends in union government 
deficits over the years- On the way to fiscal 
consolidation
Figure III.2: Government on track to achieve 
the Fiscal deficit target for FY23
104.6
46.2
58.9
Apr- Nov
(5 year Avg)
Apr- Nov
2021
Apr- Nov
2022
As a per cent of BE
3.5 3.4
4.7
9.2
6.7
6. 4
0.4 0.4
1.6
5.7
3.3
2.8
0
2
4
6
8
10
FY18 FY19 FY20 FY21 FY22
PA
FY23
BE
Per cent of GDP
 Fiscal Deficit Primary Deficit
Source: Union Budget documents, O/o CGA        Source: O/o CGA 
Union Government on track to achieve the Fiscal deficit target for FY23
3.5 The Union Budget for FY23 was presented in a recovering yet uncertain macroeconomic 
environment, not anticipating the geopolitical developments that unfolded during the year. As the 
conflict in Europe broke out early in the year, it aggravated supply disruptions and had an adverse 
impact on the prices of fuel, food, and other essential commodities. The government's fiscal 
policy response necessitated additional spending on food and fertiliser subsidies, accompanied 
by specific duty cuts to control the pass-through of the high imported prices to the consumers/
users. Despite additional fiscal resource pressures during the year, the Union Government is 
well on track to achieve the budget estimate for the fiscal deficit in FY23. The fiscal deficit of 
the Union Government at the end of November 2022 stood at 58.9 per cent of the BE, lower than 
the five-year moving average of 104.6 per cent of BE during the same period (Figure III.2).
Conservative budget assumptions provide a buffer during global uncertainties.
3.6 This resilience in the fiscal performance of the Centre has resulted due to a recovery in 
economic activity, buoyancy in revenues observed during the year, and conservative assumptions 
of macroeconomic variables in the Budget. The prudent assumptions in Budget FY23 provided a 
buffer to the government during global uncertainties. As an illustration, the Gross Tax Revenue 
(GTR) to the Centre was envisaged to grow at 9.6 per cent in FY23 BE relative to FY22 RE. 
However, given the higher 'Provisional Actual' figures recorded for the GTR relative to the 
Revised estimates in FY22, the growth in GTR of FY23 BE turns out to be a mere 1.8 per cent 
over FY22 PA. Against this implicit (budgeted) growth, the data of the first eight months of the 
year show that GTR has grown at a much higher rate (Table III.1). The annual estimate of GTR 
for FY23 is thus expected to overshoot the budget estimates.
44 Economic Survey 2022-23
Table: III.1: Stable performance of the Union Government fiscal indicators from April to 
november 2022
? lakh crore as a per cent of Be YoY growth (per cent)
BE FY23
Apr-Nov 
2021
Apr-Nov 
2022
Apr-Nov 
2021
Apr-Nov 
2022
5 yr Avg 
Apr-Nov 
Apr-Nov 
2021
Apr-Nov 
2022
Revenue Receipts 22.04 13.58 14.23 75.9 64.6 12.3 67.1 4.8
Gross tax revenue 27.58 15.42 17.81 69.5 64.6 13.9 50.3 15.5
Assignment to 
States
8.17 4.03 5.51 60.5 67.5 16.6 20.4 36.8
Tax Revenue (net 
to Centre)
19.35 11.35 12.25 73.5 63.3 12.9 64.9 7.9
Non-Tax Revenue 2.70 2.23 1.98 91.8 73.5 13.3 79.5 -11.1
Non-Debt Capital 
Receipts 
0.79 0.21 0.41 11.0 52.3 30.6 14.1 100.4
Non-Debt receipts 22.84 13.79 14.65 69.8 64.1 12.2 66.0 6.2
Total Expenditure 39.45 20.75 24.43 59.6 61.9 11.4 8.8 17.7
Revenue 
Expenditure
31.95 18.01 19.96 61.5 62.5 11.4 8.2 10.8
Capital   
Expenditure
7.50 2.74 4.47 49.4 59.6 12.9 13.5 63.4
Revenue Deficit 9.90 4.43 5.73 38.8 57.8 11.4 -48.1 29.3
Fiscal Deficit 16.61 6.96 9.78 46.2 58.9 11.5 -35.3 40.6
Primary Deficit 7.21 2.34 4.33 33.5 60.1 13.1 -66.2 85.1
Source: Union Budget documents, O/o CGA 
Performance of Union Government Non-debt Receipts
3.7 The Union government's non-debt receipts comprise revenue receipts (tax and non-tax) 
and non-debt capital receipts. The shortfall in the non-debt receipts to meet the expenditure 
requirement is met by borrowings of the government (called fiscal deficit). This section evaluates 
the performance of the Receipts side of the Union Government's finances.
Sustained revenue buoyancy over the last two years
3.8 After plummeting during the pandemic-affected year FY21, revenue receipts registered 
robust growth in FY22 PA, both on a YoY basis and to the pre-pandemic year FY20  
(Annexe 1: Table 3). This revenue revival was attributed to a rebound in the collection of all 
major direct and indirect taxes (except excise duties) in FY22. Last year's revenue buoyancy 
momentum is continuing into the current year. The Gross Tax Revenue registered a YoY growth 
of 15.5 per cent from April to November 2022, and the Net Tax Revenue to the Centre after the 
assignment to states grew by 7.9 per cent on a YoY basis (Table III.1, III.2). 
45 Fiscal Developments- Revenue Relish
Table: III.2: Buoyant Union Government taxes from April to November 2022
In ? lakh crore as a per cent of Be YoY growth (per cent)
BE FY23
Apr-Nov 
2021
Apr-Nov 
2022
Apr-Nov 
2021
Apr-Nov 
2022
Apr-Nov 
2021
Apr-Nov 
2022
Gross Tax Revenue, of 
which
27.58 15.42 17.81 69.5 64.6 50.3 15.5
Direct taxes 14.20 7.00 8.67 63.1 61.0 66.3 23.9
a. Corporation Tax 7.20 3.54 4.28 64.6 59.5 90.4 21.1
b. Taxes on income  
    other than  
    Corporation tax
7.00 3.46 4.39 61.7 62.7 47.2 26.7
Indirect taxes 13.30 8.21 8.91 74.5 67.0 38.6 8.5
c. Custom 2.13 1.26 1.41 92.5 66.4 99.5 12.4
d. Union Excise  
    Duties
3.35 2.42 1.91 72.2 57.1 23.2 -20.9
e. Service Tax 0.02 0.01 0.00 50.2 20.4 -52.6 -18.7
f. GST 7.80 4.53 5.57 71.9 71.5 36.5 23.1
Source: Union Budget documents, O/o CGA 
3.9 The resilience exhibited by economic growth underpins the sustained revenue buoyancy 
observed over the years. However, that revenues have grown at a pace much higher than the 
growth in GDP is a testimony to the effectiveness of efforts taken by the government to expand 
the tax base and enhance tax compliance. Structural reforms like the introduction of GST and 
the digitalisation of economic transactions have led to the greater formalisation of the economy 
and hence expanded the tax net. Other tax administration/policy measures, such as the Faceless 
Assessment and Appeal, simplification of return filing, assistance to taxpayers in getting familiar 
with the systems, generation of e-way bills under the GST system, and information sharing 
between government departments among others, have nudged higher tax compliance through 
technology and artificial intelligence. Details may be seen in Annexe 2 and 3.
Direct taxes propelling the growth in Gross tax revenue
3.10 Direct taxes, which broadly constitute half of the Gross Tax Revenue (Figure III.3), have 
registered a YoY growth of 26 per cent from April to November 2022, enabled by corporate 
and personal income tax growth. The growth rates observed in the major direct taxes during the 
first eight months of FY23 were much higher than their corresponding longer-term averages  
(Figure III.4).