The country’s fiscal deficit, or the difference between earnings and expenditure, in the first eight months of the current fiscal reached an alarming level of nearly 94 per cent of the annual target.

This can upset the Finance Minister’s promise of keeping the deficit under the budget estimate of 4.8 per cent.

According to the latest data released by the Controller General of Accounts, the fiscal deficit touched Rs 5.09-lakh crore during April-November, or 93.9 per cent of the Budget target of Rs 5.43-lakh crore for the full year. In the first eight months of the last fiscal, this deficit was slightly above 80 per cent.

Expenditure

The fiscal deficit is high on account of an increase in the non-Plan expenditure (mainly on interest and subsidy). The Plan expenditure has also risen, but the problem has been compounded by a dip in tax collection, which came down to 44.8 per cent in April-November from 47.9 per cent in the year-ago period. Overall revenue receipts are same as last year.

Now, there is hope that tax collection, especially income-tax and corporate tax, will see good growth in the coming months, but “that will not be sufficient to bring the deficit within the budgeted target,” said D. K. Pant, Director (Public Finance) with India Ratings.

He added the deficit can be reduced by a sharp contraction in Plan expenditure. However, this will have implications for growth, he warned.

Agreeing with Pant, Aditi Nayar, Senior Economist with ICRA, said the Centre’s fiscal situation remains gloomy.

“Notwithstanding the recent improvement in the pace of growth of direct taxes, corporate tax and excise collections seem likely to fall short of the estimate,” she said.

Shishir.s@thehindu.co.in

(This article was published on December 31, 2013)
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