Core sectors grow 8.1%; fiscal deficit at 39% of target

Output of eight core infrastructure sectors, which accounts for two-fifths of India’s industrial output, expanded at a healthy 8.1% in September, official data released on Tuesday showed. However, this was its slowest pace in four months, as seven of the sectors, barring the fertilizer industry, saw slowing output growth.

In the same month a year earlier, core sector output grew at a revised 8.3%.

Separately, data from the Controller General of Accounts (CGA) showed that the central government’s fiscal deficit during the April-September period stood at ₹7.02 trillion, or 39% of the full-year estimate of ₹17.87 trillion, aided by double-digit growth in tax and non-tax revenue receipts.

While tax revenue receipts in the first half of the current fiscal improved by 16% to about ₹16.2 trillion, non-tax receipts jumped by 50% to ₹2.37 trillion on the back of higher dividend receipts by the Centre.

The fiscal deficit was at ₹6.19 trillion, or 37% of the annual target in the year-ago period.

Commerce ministry data showed that output growth of coal, steel, electricity, natural gas, refinery products, cement and fertilizers grew at a high single digit, although it moderated from 12.5% in August.

Manufacturing PMI for September, released earlier this month, showed a sharp expansion at 57.5, although it was at its slowest pace in five months.

According to the Federation of Automobile Dealers Associations (FADA) data, overall vehicle retail sales registered a 20% annual growth in September due to festive-season demand and pick-up of sales in rural areas.

Also, after months of sluggish growth, freight movement through Indian Railways recorded an annual growth of 6.67% in September, registering 123.53 million tonnes (mt) due to the movement of higher coal and goods ahead of the festive season.

Policymakers expect the economy to grow at 6.5% in the current fiscal.

Core sector data showed that crude oil output contracted by 0.4% annually in September after two successive months of output growth. The annual growth rate in the production of refinery products, fertilizer, cement and electricity slowed down in September. Coal production grew at double digits in each of the months in the second quarter, while electricity generation growth, which steadily improved from April, moderated in September to 9.3% after a double-digit expansion in August, data showed.

In the first half of this fiscal, the eight infrastructure sectors grew at 7.8% against 9.8% in the year-ago period.

The Centre has transferred ₹4.55 trillion to state governments as tax devolution during April-September, up from ₹3.76 trillion during the same period of the previous fiscal, the finance ministry said in a separate statement on Tuesday.

The Centre aims to narrow the fiscal deficit—the difference between the government’s income and spending—to 5.9% of gross domestic product during 2023-24.

In the first half of this fiscal, the Centre’s capex rose to ₹4.91 trillion, or 49% of the year’s budget estimates, up from ₹3.43 trillion during the year earlier.

Total receipts during the April-September period of 2023-24 stood at ₹14.17 trillion, or 52.2% of annual estimates, of which tax receipts stood at ₹11.6 trillion, or 49.8% of annual estimates.

Corporate tax collections rose over 20% to ₹4.51 trillion in April-September, data showed.

Total expenditure in the same period of 2023-24 rose to ₹21.19 trillion, or 47.1% of the annual estimates, from ₹18.24 trillion during the same period of the previous year.

The fiscal position of the central government has been fairly comfortable during the first half of the current fiscal, despite economic headwinds on the back of higher direct tax collection during August and September, said Rajani Sinha, chief economist of CareEdge.

“On the revenue front, while we foresee slippage on the disinvestment front, we remain optimistic about meeting the targeted revenue receipts supported by buoyancy in tax as well as non-tax collections,” Sinha said.

“On the expenditure front, subsidy spending remains elevated, led by higher outlay on fertilizer and petroleum subsidies,” Sinha said, adding the need to be watchful of the government’s trajectory of revenue spending ahead of the election season, along with the possibility of lower-than-expected nominal GDP growth.