The macro-economic data released on Friday showed that fiscal deficit has reached 86.5 per cent of the Budget Estimate.
Fiscal deficit is the differences between income and the expenditure of the Central Government.
The data, as reported by the Controller General of Accounts (CGA) under the Finance Ministry, revealed that while the income grew by 19 per cent, the expenditure was higher by over 36 per cent during the first four months (April-July) of the current fiscal. Higher expenditure resulted in fiscal deficit of more than 86 per cent.
However, this number is still less than 92.4 per cent reported last fiscal.
For April-July 2018, revenue growth was at a healthy 15 per cent outpacing the 9 per cent rise in revenue expenditure and allowing for a robust 17 per cent expansion in capital outlay.
July performance
However, for the month of July, while revenue expenditure recorded a considerable 21 per cent growth, capital spending displayed a contraction of 9 per cent. Year-on-year decline in the tax revenues of the Central Government in the month of July 2018 against July 2017, seems to be led by the provisional settlement of a portion of the unsettled I-GST balances between the Centre and the States.
The data also showed that total expenditure during April-July was ₹8.89 lakh crore or 36.4 per cent of Budget Estimate.
The expenditure was higher as a percentage of Budget Estimate for the year-ago period. The capital expenditure was ₹1.11 lakh crore or 37.1 per cent of Budget Estimate, the report said.
Aditi Nayar, Principal Economist at ICRA Ltd, said the market will continue to monitor the likelihood of meeting the budgeted targets for revenues related to the GST, dividends and profits, and disinvestment, and assess whether the outlays required for revised MSPs, the NHPS, fuel and other subsidies, and bank recapitalisation would prove to be adequate.
Capital spending
“While a fiscal slippage in FY2019 may not necessarily arise, there is a risk that capital spending would be curtailed to prevent breaching the fiscal deficit targets,” she said.
She also said the size of the market borrowing for both the Central and the State Governments for second half of the current fiscal as well as the expectations regarding the magnitude of open market operations to be conducted by the RBI, would influence G-sec yields going forward.