Fiscal deficit exceeds 95% of Budget Estimate in H1

The fiscal deficit for the first six months — April-September — of the current financial year has exceeded 95 per cent of the Budget Estimate, a government data revealed on Thursday.

Fiscal deficit is the difference between expenditure and income of the government. Normally it is bridged by the borrowing raised by the government in consultation with the Reserve Bank of India (RBI). The government has estimated to the keep the fiscal deficit at 3.3 per cent of the GDP (Gross Domestic Product).

According to the data released by the Controller General of Accounts (CGA), fiscal deficit for the period April-September crossed ₹5.94 lakh crore which is 95.3 per cent of the Budget Estimate (over ₹6.24 lakh crore). The corresponding figure for the same period of the last fiscal was over 91 per cent of the Budget Estimate.

One of the reasons for the higher fiscal deficit during the period was frontloading of expenditure. The current fiscal is the second year in succession when the Budget was presented on February 1 and the entire Budget-making exercise was completed before March 31. This means money for expenditure was available from April 1. However, taxes cannot be front loaded and is deposited with a lag. All this results in higher expenditure, but lesser income during the first six months of the fiscal, which in turn has an impact on the fiscal deficit.

Also, Goods and Services Tax (GST) collection has not been up to the mark. As against the target of ₹1-1.10 lakh crore, actual collection has been ₹94-96,000 crore. Revenue growth stood at 11 per cent during the period under consideration falling short of the 13.8 per cent rise in revenue expenditure, and marginally trailing the 11.1 per cent rise in capital outlay.

Aditi Nayar, Principal Economist at ICRA, said: “Likelihood of meeting the budgeted targets for revenues related to the GST, dividends and profits, and disinvestment, and the adequacy of outlays for revised MSPs, the NHPS, fuel and other subsidies, and bank recapitalisation would determine whether a fiscal slippage emerges relative to budgeted level for FY2019,”

Sunil Kumar Sinha, Principal Economist at India Ratings, said at a more disaggregated level some of the ministries have spent higher during April-September as compared to the last fiscal. Drinking water and sanitation, heavy industries and public enterprises, labour and employment, power, labour, steel and road transport and highways are a few such ministries.

Similarly, some ministries have spent less — consumer affairs, food and public distribution, north-eastern region, food processing, housing and urban affairs, to name a few. “India Ratings believe there is nothing alarming in this data as typically Centre’s expenditure is front-loaded in the first half of the fiscal and revenues (both tax and non-tax) mostly gets realised in the second half,” he said.

In September, the tax revenues (gross of refunds of States) displayed a moderate growth of 9 per cent, with the healthy performance of direct tax collections being counteracted by the muted indirect tax growth. The cut in excise duty on fuels earlier this month, would modestly dampen indirect tax revenues during second half (October-March) adding to the fiscal stress points.

Non-tax revenues expanded by 34.8 per cent and stood at 44.5 per cent of the Budget Estimates for the year. With a modest rise in the disinvestment proceeds in September, the collections in H1 stood at a limited 12.4 per cent of the Budget Estimate for FY19, enhancing concerns over the achievement of the full-year target.

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