Fiscal deficit reaches 92.6 per cent for six months

Windfall gain from the Reserve Bank of India (RBI) helped the government to limit its fiscal deficit to 92.6 per cent during first six months (April-September) of the current fiscal -- 2019-20.

Fiscal Deficit means difference between income and expenditure of the government and normally it is bridged by market borrowing. The government intends to keep the deficit to 3.3 per cent of the GDP (Gross Domestic Products).

According to figures made public by the Controller General of Accounts, the deficit for the said period was more than Rs 6.51 lakh crore while the budget estimate has been pegged at Rs 7 lakh crore. In terms of percentage, it is 92.6 per cent of the budget estimate as against 95.3 per cent of the budget estimate for 2018-19. However, fiscal deficit as a percentage of revised estimate for first six months of the revised estimate of FY 19 was also 92.6 per cent.

Government’s total earning for the first six month was 40.2 per cent of the budget estimate while expenditure was 53.4 per cent. Total receipts include tax revenue, non tax revenue, non-debt capital receipts, recovery of loans and other receipts.. Transfer from RBI figures in non tax revenue under the head of dividend and profits. Here the amount realised during April-September period is Rs 1.55 lakh crore which is 95 per cent of the budget estimate. Though, transfer from RBI is not specifically mentioned, but it is believed that an amount of Rs 1.28 lakh crore is from RBI is part of this amount.

The worrying trend is dismal performance of tax revenue, on quarterly basis, net tax revenue growth declined to 3 per cent in July-September quarter from 6 per cent in April-June quarter, leading to April-September net tax revenue growth of 4.2 per cent. Now, net tax revenue has to grow at 42 per cent to achieve FY20 budget target of Rs 16.5 lakh crore, which appears to be a daunting task. The corporate tax, income tax and GST (CGST, UTGST, IGST and Cess) collection growth in April-September period has been 2.3 per cent, 8.9 per cent and -2.8 per cent respectively.

Meanwhile, the good news is that capital expenditure has gone up to 55.5 per cent of the budget estimate as against 54.2 per cent during corresponding period of last fiscal. At the same time, revenue expenditure has come down a tad to 53.1 per cent as against 53.3 per cent. Capital expenditure mainly refers to developmental expenditure while revenue expenditure comprises of debt servicing, subsidies and salaries etc.

Devendra Kumar Pant, Chief Economist with India Ratings & Research said that higher expenditure growth in October-December quarter will provide some support to economic growth which is affected by demand slowdown. “Going forward, while the growth is likely to improve in October-March period and that will translate in relatively better tax collection growth. However, the corporate rate tax cuts will limit upside to direct tax collection growth. In all probability the government will miss its FY20 fiscal deficit target of 3.3 per cent of GDP,” he said.