An analysis reveals that fiscal deficit of Gujarat will be substantially lower than the expected 1.8% of gross state product. Even though the revenue surplus is likely to be half of the budget forecast. Due to the “implausible capex target” outlined in the budget, India Ratings anticipates the state’s fiscal deficit to be 1.2% of gross state domestic product (GSDP). As opposed to the FY24 budget forecast of 1.8%.

The Center limits each state’s fiscal deficit to 3% of its GSDP and an additional 0.5% under specific circumstances.

However, the agency believes that due to “the optimistic projections on nominal GSDP and revenue expenditure growth,” the revenue surplus is only likely to be 0.2% of GSDP, or less than half of the 0.4% budgeted for FY24.

Revised projections for Gujarat:

In comparison to the planned 0.05%, the revised forecasts for FY23 suggest a revenue surplus of 0.3%, or Rs 6,694 crore. It was 0.3 percent in FY22. Due to an increase in nominal GSDP of 15.5% in FY23, revenue receipts expanded at a solid rate of 17.6%. Yet, revenue expenditure also increased during the year at a faster rate of 18.1%.

Despite higher investment in FY23, a better-than-expected revenue surplus enabled the state reduce its fiscal account deficit. The budgetary deficit for FY23 is anticipated to be 1.5%, which is 10 basis points less than anticipated.

Fiscal year 2023:

In FY23, Gujarat was able to collect more money than was planned. As a result, the state also raised spending. Yet, the rise in spending was less than the rise in revenue. The entire expenditure exceeded the FY23 budget by Rs 11,542 crore. However, the total receipts were higher by Rs 14,242 crore.

Gujarat’s own tax revenue and tax devolution were higher in terms of revenue receipts, increasing by Rs 13,537 crore and Rs 4,631 crore, respectively. However, the rise in tax revenues was constrained by a shortfall in non-tax receipts. In FY23, the state’s non-tax revenues decreased by Rs 2,595 crore and grants from the federal government by Rs 1,431 crore, respectively.

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