The Centre’s fiscal deficit during the first five months (April-August) of the current fiscal surged to ₹4.07 lakh crore, a 10.29 per cent increase over ₹3,69 lakh crore in same period last year.

As a percentage of the Budget estimate, fiscal deficit during April-August 2016 represented 76.4 per cent, higher than 66.5 per cent in same period last fiscal, official data released on Friday showed.

Fiscal deficit has jumped despite the Centre’s net tax revenue going up by nearly ₹70,000 crore during April-August, economy watchers pointed out.

Pressure points With the government keeping up a tight leash on the expenditure front, pressure has mainly come from lower inflows non-tax revenues and disinvestment, economy watchers said.

Aditi Nayar, Senior Economist, ICRA, expects inflows from non-tax revenues to pick up in the next few months, particularly after the spectrum auction and planned buy backs and divestment.

“Overall, we continue to view the fiscal situation as challenging but not alarming,” Nayar said.

DK Pant, Chief Economist, India Ratings, said that increased expenditure this fiscal has been met by higher net tax revenues. “There is shortfall in non-tax revenues and non debt capital receipts (disinvestments etc) and this is getting reflected in higher fiscal deficit,” Pant told BusinessLine .

For the month of August alone, fiscal deficit came in at ₹14,333 crore. In the same month last year, there was fiscal surplus of ₹15,808 crore, Pant pointed out.

Encouraging signs Nayar said that the increase in capital spending in the month of August 2016 is enthusing, given the contraction seen in the first four months of this fiscal.

This would provide some traction to Gross Fixed Capital Formation growth in second quarter fiscal 2017.

Despite the commencement of revised pay and pension outflows, incremental revenue expenditure in the month of August in 2016 has not enlarged over August 2015 levels, benefitting from a significant slowdown in subsidy outgo, she added.

While net tax revenue growth has slowed at end August 2016, as compared with end July 2016, the growth nonetheless remains very elevated, boosted by the windfall from excise collections on fuels.

Advance tax collections in September will help to clarify the trajectory for corporate tax collections for the rest of the year, relative to the sluggish inflows in the first five months, Nayar said.

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