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The Centre overshot its full year fiscal deficit estimate by 20 per cent by the end of February despite easing its deficit goalposts in the Revised Estimates for 2017-18.
The fiscal deficit touched ₹7,15,699 crore, or 120.3 per cent of the Revised Estimate of ₹5,94,849 crore, between April 2017 and February 2018. It was lower at 113.4 per cent of the target in the corresponding period a year ago.
The Centre’s revenue deficit also jumped up to a similar level, amounting to ₹5,24,407 crore, or 119.3 per cent of the Revised Estimate, in the first 11 months of the fiscal. It was, however, much higher at 142.5 per cent of the target a year ago.
Despite uncertain tax revenue, Finance Minister Arun Jaitley, in the Union Budget, had relaxed the deficit targets for the current fiscal to ensure that the expenditure needed to revive growth doesn’t get curtailed. Accordingly, the fiscal deficit was pegged at 3.5 per cent of the GDP in the Revised Estimate for 2017-18, against the Budget Estimate of 3.2 per cent.
Slower-than-expected revenue collections, particularly receipts from non-tax revenue, seem to be the main reason for the precarious fiscal situation of the Centre at the end of February.
Revenue receipts amounted to ₹11,77,678 crore, or 78.2 per cent of the target, in the period under review. Of this, tax revenue amounted to ₹10,35,546 crore or 81.6 per cent of the Revised Estimate. Non-tax revenue was just ₹1,42,132 crore, or 60.2 per cent of the target. Overall revenue receipts between April and February amounted to ₹12,83,472 crore, or 79.1 per cent of the Revised Estimate, which is a partial improvement from the same period last fiscal.
The Centre’s expenditure, however, was on track — total spending amounted to ₹19,99,171 crore, or 90.1 per cent of the Revised Estimate. Of this, revenue expenditure was ₹17,02,085 crore, or 87.5 per cent of the target, while capital spending was ₹2,97,086 crore and exceeded the full year target by nearly 9 per cent.
While the Finance Ministry is confident of meeting the fiscal deficit targets for 2017-18, analysts said that improvement in on-tax revenue will be crucial.
“The extent to which the non-tax revenue can be shored up in March 2018 would crucially determine if the actual fiscal deficit for 2017-18 breaches the Revised Estimate. Total expenditure needs to contract by 2 per cent on a year-on-year basis in March 2018, to avoid exceeding the level included in the Revised Estimate of the fiscal,” said Aditi Nayar Principal Economist, ICRA.
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