The country’s fiscal deficit at the end of October hit 96.1 per cent of the full year budget estimate for 2017-18, mainly due to lower revenue collections and rise in expenditure. During the same period of 2016-17, the deficit stood at 79.3 per cent of the target. Amid tepid tax and non-tax collections, the increase in deficit raises concerns over whether the government will be able to stick to its fiscal deficit aim of 3.2 per cent of Gross Domestic Product by March-end 2018.
In absolute terms, the fiscal deficit — the difference between expenditure and revenue — was Rs 5.25 lakh crore during April-October of 2017-18, according to data released by the Controller General of Accounts (CGA) on Thursday. Prices of stocks, bonds and rupee fell on Thursday, reacting to the release of the fiscal deficit numbers. The NSE Nifty index lost 1.3 per cent to end at 10,226.55, while benchmark 10-year bond yield was up 2 basis points to 7.05 percent.
Finance minister Arun Jaitley said the government plans to stick to the fiscal consolidation road map. “The FRBM (Fiscal Responsibility and Budget Management) report is under consideration. The last three years, we have an exemplary record as far as maintaining that glide path is concerned. We intend to move on that track,” Jaitley said at the HT Leadership Summit, as per a PTI report.
“The inching up of the fiscal deficit highlights the lingering concerns related to the possibility of a fiscal slippage in the current year. The risk of a slippage relative to the fiscal deficit target for FY2018 stems primarily from the growing likelihood that tax and non tax revenues would undershoot the budgeted level, whereas concerns regarding the magnitude of disinvestment inflows have ebbed,” said Aditi Nayar, Principal Economist at rating agency Icra Ltd. For 2017-18, the government aims to bring down the fiscal deficit to 3.2 per cent of GDP, down from 3.5 per cent in the previous fiscal year. The CGA data showed that the government’s revenue receipts were at Rs 7.29 lakh crore in April-October period, which is 48.1 per cent of the budget estimate (BE) of Rs 15.15 lakh crore for the entire year. The receipts, comprising taxes and other items, were at 50.7 per cent of the target in the year-ago period.
The government’s total expenditure was Rs 12.92 lakh crore at October-end, or 60.2 per cent of the budget estimate. It was 58.2 per cent of the budget estimate a year ago. Capital expenditure during April-October of 2017-18 was only 52.6 per cent of the BE compared to 50.7 per cent in the same period of the previous fiscal. Revenue expenditure, including interest payment, was 61.5 per cent of the BE during April-October 2017-18. This compares with 59.2 per cent a year earlier.
“Based on the trend in the first seven months of this fiscal and the budget estimates for the year, there is scope for revenue expenditure to expand by 7.4% on a YoY basis in November 2017-March 2018. However given the front-loading in the early part of the year, capital outlay would have to contract by 16.8 per cent in the last five months of this fiscal, to avoid exceeding the budget estimate,” Nayar said. Dividends and profits
received upto October 2017 stood at a modest 30 per cent of the budget estimates, reflecting the impact of the decline in the surplus transferred by the RBI. The RBI in August announced that it will transfer Rs 30,659 crore as surplus to the government for the year ended June 2017, less than half the amount transferred last year.