The country’s fiscal deficit touched 114.8 per cent of the full-year target of Rs 6.24 lakh crore at the end of November on account of lower revenue collections, according to data released by the Controller General of Accounts (CGA) Thursday. At the end of November in the previous financial year, the fiscal deficit was 112 per cent of the Budget Estimate .
Analysts note that there could be some fiscal slippage by the end of March as the government is expected to pay higher than budgeted amount on subsidies even as disinvestment target of Rs 80,000 crore may be challenging to achieve. The finance ministry has maintained that it will achieve the fiscal deficit target.
The government plans to reduce fiscal deficit to 3.3 per cent of Gross Domestic Product by March-end 2019. The fiscal deficit, or gap between expenditure and revenue, stood at Rs 7.16 lakh crore during April-November of the current financial year.
The government received Rs 8.96 lakh crore (49.32 per cent of corresponding BE 18-19 of total receipts) up to November, 2018. It comprising Rs 7.31 lakh crore of tax revenue, Rs 1.38 lakh crore of non-tax revenue and Rs 26,277 crore of non-debt capital receipts. Non-debt capital receipts consists of recovery of loans of Rs 10,467 crore and disinvestment mop-up of Rs 15,810 crore. Finance ministry said in a separate statement that the Centre has transferred Rs 4.31 lakh crore crore to states as devolution of share of taxes till November, which is Rs. 46,677 crore higher than the corresponding period of last year 2017-18. Total expenditure incurred by the Central government is Rs16.13 lakh crore crore (66.06 per cent of corresponding BE 18-19), out of which Rs 14.21 lakh crore crore is on revenue account and Rs 1.91 lakh crore is on capital account.
Reducing deficit to 3.3% of GDP would be tough
With fiscal deficit number, which reflects excess of expenditure over revenues, coming in around 115 per cent of the full-year Budget Estimates by November, the government may find it tough to achieve targeted reduction of deficit to 3.3 per cent of GDP by March-end. Even as disinvestment receipts are picking up with PSUs share buybacks and purchase of government equity by companies operating in same sector, unless the government rolls over certain subsidies to the next year or capital expenditure is further pruned, there could be some fiscal slippage at the margin, analysts note.
“With capital expenditure recording a year-on-year contraction of 33 per cent in November 2018, the year-to-date growth has slowed to a muted 4 per cent, which is an unfavourable trend,” said Aditi Nayar, Principal Economist at rating agency ICRA Ltd. Out of the total revenue expenditure, Rs 3.48 lakh crore is on account of interest payments and Rs 2.19 lakh crore is on account of major subsidies. “Fears of a fiscal slippage will persist, with the Government’s fiscal deficit having risen to 115 per cent of the budget estimate for FY2019 in the first eight months of the year. There are several risks to meeting the budgeted targets for revenues and expenditures, with one of the predominant concerns arising from a possible shortfall in indirect tax collections, despite the seasonal pickup in tax revenues in the last quarter of every fiscal,” Nayar said. ICRA estimates fiscal deficit of 3.3-3.4 per cent for
2018-19. However, the CGA said deficit numbers for eight months do no present the full picture. “Fiscal deficit figure shown in monthly accounts during a financial year is not necessarily an indicator of fiscal deficit for the year as it gets impacted by temporal mismatch between flow of not-debt receipts and expenditure up to that month on account of various transitional factors both on receipt and expenditure side, which may get substantially offset by the end of the financial year,” the CGA said in a note attached to the accounts.
Tax revenue growth shows mixed trends, with a healthy expansion in direct taxes along with by a contraction in indirect tax collections on a year-to-date basis. Disinvestment proceeds, which stood at a limited Rs 15,800 crore in April-November FY2019, have more than doubled to Rs 34000 crore as of December 27, 2018.