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30Fiscal deficit has breached the Budget Estimate in the first seven months of the current fiscal, according to the Controller-General of Accounts. The data released on Friday showed that fiscal deficit for April-October was over ₹6.48 lakh crore, against the Budget Estimate of ₹6.24 lakh crore, or 103.9 per cent of the target.
Fiscal deficit is the difference between earning and expenditure of the Government.
The government wants to keep the budget deficit at 3.3 per cent of the Gross Domestic Product (GDP), though experts believe that it could go up to 3.5 per cent. But if the government manages to boost revenue, from both tax and non-tax sources, there is a possibility of keeping the deficit at the budgeted level. Since this is an election year, experts are not expecting any major expenditure cut, rather they feel it could go up. During the said period, the government’s total expenditure was over ₹14.56 crore, nearly 60 per cent of the Budget Estimate. This comprises over ₹1.77 lakh crore on capital account and ₹12.79 lakh crore on revenue account. This is second year of the Budget when the expenditure for the full fiscal year is taking place from April 1.
High expenditure
Since expenditure is high during the first six months and revenue realisation picks up during second half of the fiscal, this could be a reason for higher fiscal deficit.
On the revenue front, the government has received over ₹8.08 lakh crore, which is 44.45 per cent of the Budget Estimate. It comprises ₹6.61 lakh crore as tax revenue (net to Centre), ₹1.27 lakh crore as non-tax revenue and ₹19,181 crore as non-debt capital receipts. Non-debt capital receipts consists of recovery of loans (₹9, 080 crore) and disinvestment of PSUs (₹10,101 crore).
The Centre transferred over ₹3.77 lakh crore to the State Governments as devolution of share of taxes up to this period which is ₹39,796 crore higher than the corresponding period of last year.
Devendra Kumar Pant, Chief Economist, India Ratings and Research, said while expenditure continues to grow, total receipts in October shrank from the same month last year. Non-debt capital receipts in April-October were nearly half of April-October 2017.
“Based on July-September of 2018-19 GDP growth at 7.1 per cent and likelihood of lower growth in second half of 2019 (October-March), the chances of fiscal slippage are very high, Ind-Ra expects FY19 fiscal deficit to be 3.5 per cent of GDP,” he said.
Aditi Nayar, Principal Economist at ICRA, also fears that fiscal slippage in FY19 may intensify following the 23.5 per cent rise on yearly basis in the fiscal deficit during the first seven months, which crossed the Budget Estimate for the full year despite the relief offered by the recent correction in crude oil prices.
“The extent of a potential fiscal slippage in FY19 will be driven by the likelihood of meeting the targets for GST, excise duty, dividends and profits, and disinvestment, and the adequacy of outlays for revised MSPs, the NHPS, fuel and other subsidies,” she said adding that notwithstanding fears of a potential fiscal slippage in FY19, the announcement of OMO (Open Market Operation) purchases by the RBI in December and the decline in crude oil prices will keep a check on G-sec yields in the immediate term.
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