Lower expenditure limits fiscal deficit at targeted 3.4%

Even with lesser revenue, the Government managed to limit the fiscal deficit within the revised estimate of 3.4 per cent of GDP for the fiscal year 2018-19 with the help of lower expenditure. Expansion of Gross Domestic Product (GDP) in absolute number made the work easier for the government.

Fiscal deficit is the difference between income and expenditure of the Government. It is expressed both in absolute number and as a percentage of GDP in the General Budget. Normally, the government borrows from the market to fund the deficit. If the problem of lesser tax revenue (from both direct and indirect) was there, then there was challenge to curb the expenditure. Now data shows that there was more compression in capital expenditure than revenue expenditure.

According to data posted by Controller General of Accounts (CGA), fiscal deficit for 2018-19 was over ₹6.34 lakh crore which is 3.39 per cent of the GDP. This is according to the revised estimate mentioned in the Interim Budget. Total Expenditure incurred by the Government was over ₹23.11 lakh crore which is little over 94 per cent of the revised estimate. Out of total expenditure, revenue expenditure and capital expenditure were ₹20.08 lakh crore and ₹3.02 lakh crore respectively.

Economists feel that expenditure compression, especially on capital front, is not a positive sign, as it will hurt long-term private investment and in turn the growth potential. Since private investment is not picking up, public investment is very critical. Now, there is hope that the new Government will propose incentives for investment.

On the revenue front, the situation was not very encouraging. The government received ₹16.66 lakh crore which is 91.4 per cent of the Revised Estimate. There was shortfall not only in direct taxes by over ₹50,000 crore but also in GST collection (for Centre) by almost ₹1 lakh crore. The only good news was from disinvestment, where it managed to exceed target and collected ₹85,045 crore.

Sunil Kumar Sinha, Principal Economist with India Ratings, said that FY19 fiscal deficit at 3.4 per cent of GDP is in line with government’s revised fiscal deficit target. However, in absolute term the provisional fiscal deficit in FY19 has widened from revised estimate by ₹109.69 billion. “Clearly the pressure on fiscal front, in the light of GDP numbers released today, is originating more from the revenue side. Forthcoming Budget will be crucial from the point of view of growth and tax buoyancy assumption,” he said

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