Govt fails to reduce revenue and fiscal deficits: CAG

The Government’s failure to reduce revenue and fiscal deficits has been criticised by the Comptroller and Auditor General...

The Government’s failure to reduce revenue and fiscal deficits has been criticised by the Comptroller and Auditor General (CAG) in the Accounts of the Union Government report for the year-ended March 2007.

Revenue deficit in 2006-07, was Rs 1,32,847 crore at 3.32 per cent of the GDP — 1.12 percentage points higher than the budget estimate— while fiscal deficit was Rs 1,82,934 crore at 4.43 per cent of the GDP — 0.63 percentage points higher.

In 2004-05, the Government laid out the Medium-term Fiscal Policy Statement (MTFPS) to operationalise the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, which came into effect from July 2004. The Act was to ensure reduction of fiscal deficit and elimination of revenue deficit by March 31, 2009.

Accordingly, fiscal and revenue deficit targets were set as percentages of GDP. In 2004-05, percentages were set at 3.6 per cent and 1.1 per cent for the year 2006-07. It was revised to 3.8 per cent and 2.1 per cent in 2006-07.

Presenting the report today, B K Chattopadhyay, additional deputy comptroller auditor general, said, “These deficits are significantly higher than the set targets.” His statement comes even as the finance minister said today, “The Government is hopeful of maintaining fiscal discipline during the current year.” Fiscal and revenue deficits are budgeted to come down to 3.3 per cent and 1.5 per cent of the GDP during the current fiscal.

The Accounts of the Union Government has, for the first time, been released two months ahead of the usual February release date to enable better transparency and planning for the next union budget.

Another worrying trend is the growing share of revenue expenditure (90.47 per cent) an increase from the 10th plan average of 87.27 per cent as compared to capital expenditure (9.53 per cent) a decline from the tenth plan average of 13 per cent. J C Sharma, chief economist in the CAG office, “Capital expenditures are supposed to be 3 per cent of the GDP by 2009-10. This means an expenditure of Rs 99,000 crore this year, but it has only been Rs 66,000 crore.”

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On the brighter side, tax revenues are increasing with net tax revenues of Rs 3,53,182 crore for 2006-07, an increase of 29.96 per cent over the previous fiscal. Much of the growth came from increases in corporation and service tax collections, which grew by 42.5 per cent and 63 per cent respectively. Income tax collections too grew by 34.13 per cent.

Report highlights

•Accounts of the Union Government for 2006-07 released ahead of February target

•Fiscal and revenue expenditures are increasing and not in line with FRBM Act targets

•However, finance minister says fiscal discipline is on track

•Cites global pressures for increasing expenditures

•Capital expenditure declining even as revenue expenditures shoot up

•Tax revenues buoyant and growing at 29.96 per cent.