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Fiscal deficit for the first three months of the current financial year has reached more than 61 per cent of the Budget Estimate, according to government data released on Wednesday.
Fiscal deficit is the difference between government’s earning and expenditure. At 3.3 per cent of GDP (Gross Domestic Product), the government has budgeted over ₹7-lakh crore as fiscal deficit for the current fiscal.
According to data made public by the Controller General of Accounts, the Government received over ₹2.89-lakh crore during the first three months of the current fiscal. It comprised ₹2.51-lakh crore of tax revenues (net to the Centre), ₹33,475 crore of non-tax revenues and ₹4,764 crore of non-debt capital receipts. More than ₹1.48-lakh crore was transferred to States as devolution of share of taxes up to June; this is ₹8,896 crore less than the previous year.
The Centre’s total expenditure was more than ₹7.21-lakh crore out of which ₹6.58-lakh crore was on revenue account and ₹63,000 crore on capital account. Out of the total revenue expenditure, more than ₹1.41-lakh crore was on account of interest payments and over ₹1.51-lakh crore for major subsidies.
According to Aditi Nayar, Principal Economist with ICRA, a post-election and pre-Budget lull in spending in June kept the the fiscal deficit in the first quarter largely in line with the year-ago level, even as tax growth remained subdued. Tax collections (gross of States’ share) grew by a disappointingly low one per cent in Q1,.
Direct tax and GST collections meeting the target, and dividends/surplus from the RBI, nationalised banks and financial institutions, and PSUs will be crucial to prevent a revenue slippage. Moreover, the speed with which the disinvestment programme kicks off and the response to it will be critical. “At present, we can’t rule out expenditure cuts to prevent a fiscal slippage, if revenue targets are missed,” Nayar said
Devendra Kumar Pant, Chief Economist and Senior Director (Public Finance) at India Ratings and Research, said that while the income tax and GST collection growth are relatively better, the corporate tax mop up has not been robust. “Unless the consumption slowdown is reversed quickly, it will be a tough task for the government to achieve the FY20 fiscal deficit target,” he said.
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