Fiscal deficit touches 55.3% of FY19 target in April-May

Our Bureau New Delhi | Updated on June 29, 2018 Published on June 29, 2018

Govt’s total expenditure for the period rose to ₹4.72 lakh crore

India’s fiscal deficit has exceeded 55 per cent of the Budget estimate in just first two months (April-May) of the current fiscal. But it is still lower than what was recorded in the same period last fiscal, according to official data released on Friday.

Fiscal deficit is the difference between earning and expenditure and expressed normally as a percentage of GDP (Gross Domestic Products). The Government aims to keep the fiscal deficit at 3.3 per cent of GDP for the current fiscal while it managed to achieve 3.5 per cent during the last fiscal (2017-18). Rating agencies keep a close watch on the deficit number before deciding on sovereign rating and outlook. At present, most of the agencies have accorded last investment grade rating with stable or positive outlook.

According to the monthly account for the Central Government by the Controller General of Accounts, total receipt was little over 7 per cent of the Budget estimate. It comprised tax revenue of over ₹1.02 lakh crore while it earned ₹24,049 crore as non-tax revenue and ₹1,004 crore as non-debt capital receipts. Non-debt capital receipts consists of Recovery of Loans (₹570 crore) and Disinvestment of Public Sector Undertakings ₹434 crore). Over ₹1.11 lakh crore has been transferred to State Governments as devolution of share of taxes by Centre up to this period which is ₹15,217 crore higher than the corresponding period of the last fiscal.

During April-May, the Government incurred expenditure of over ₹4.72 lakh crore which is approximately 19.3 per cent of the Budget estimate. Since last fiscal, the entire Budget-making exercise is completed by March 31, helping the Government to start spending from the first day of the new fiscal year. Earlier, the Budget exercise used to be completed in May-June, which meant the Government used to start spending only after 3-4 months and sometime after six months, thus affecting the economic activity and in turn growth.

Experts said that fiscal deficit for April-Mayrecorded a ‘welcome year-on-year (YoY)’ decline on the back of robust growth in indirect tax and non-tax revenues and near stagnant revenue spending, allowing for a healthy rise in capital expenditure in the early part of the year. Nevertheless, at 55 per cent of the Budget estimate for FY19, the GoI's fiscal deficit for the first two months of the year was sizable.

Aditi Nayar, Principal Economist at ICRA, said the stagnation in revenue spending in April-May on a YoY basis is partly reflective of the up fronting that had taken place in the same months in 2017, following the early presentation of the Union Budget, as well as a sharp decline in the major subsidy outgo. She also mentioned that in contrast to the stagnation in revenue expenditure, capital spending recorded a substantial 21 per cent growth in the first two months of this fiscal, led by sectors such as defence, roads, railways and transfers to States.

Revenue growth

The buoyancy in GST collections, whether excise duty on fuels is cut to absorb a part of the impact of higher crude oil prices, and the extent to which dividends and profits, and disinvestment meet the budgeted targets, would drive the Government’s revenue growth in FY19. Moreover, “the adequacy of the budgeted outlays for the proposals introduced in the Union Budget for FY19 such as MSPs and the National Health Protection Scheme, fuel and other subsidies, and bank recapitalisation, would affect the fiscal space for spending over the course of the year,” she said.

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Published on June 29, 2018
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