Weak non-tax receipts pushed the Centre’s fiscal deficit for the first five months of FY17 to Rs 4.1 lakh crore, or 76.4 per cent of the full-year target of Rs 5.34 lakh crore. In the same period last year, the deficit was 66.5 per cent of the year-ago target. Though an improvement in receipts from disinvestment and PSU dividends are expected in the remaining part of the fiscal year, analysts said, unlike last year when the Centre’s capex exceeded the initial projections, a minor squeeze on such growth-inducing expenditure could be expected this year.
The Centre reiterated recently that the fiscal deficit estimate of 3.5 per cent of GDP would be adhered to.
The Centre has assumed nominal GDP growth of 11 per cent in FY17; since nominal growth returned to double digits in the June quarter and many expect this to be so for the remaining quarters too, no threat is likely to the fiscal deficit target from the base being lower than estimated.
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However, the government’s tax revenue showed a healthy growth thanks to the spillover effect of a series of excise duty hikes effected on petrol and diesel in the last few months of FY16. The April-August net tax collection was Rs 2.8 lakh crore, which was 26.6 per cent of the estimate for the full year; in the corresponding period a year ago, it stood at Rs 2.1 lakh crore or 22.8 per cent of that year’s target. The April-August growth rate in net tax revenue was 33.5 per cent, much higher than the budgeted 11.6 per cent growth rate for the full year.
The strong performance in tax revenue was mainly due to central excise, which saw a 51 per cent increase in gross receipts at about Rs 1.2 lakh crore during the period. However, corporate tax revenue receipts declined by 1.5 per cent during the period, indicating that the economy is still not out of the woods.
Overall revenue receipts during the first five months of FY17 were Rs 3.94 lakh crore, or 27.3 per cent of the full-year target; in the same period last year, revenue receipts were 29.7 per cent of the target, according to data compiled by the Controller General of Accounts. Revenue receipts were lagging as the proceeds from the ongoing buyback of shares by five PSUs from the government haven’t been factored in. Though there has been a slowdown in dividends by PSUs so far, the situation would improve in the coming months given the mandate to all PSUs to give at least 30 per cent annual dividends.