April-November Fiscal Deficit hits 112 per cent of annual target
The Centre’s fiscal deficit breached the budgeted level to touch 112% of the full-year target in just eight months, reinforcing concerns about a slippage in 2017-18.
By: FE Bureau | New Delhi | Published: December 30, 2017 5:30 AM
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The Centre’s fiscal deficit breached the budgeted level to touch 112% of the full-year target in just eight months, reinforcing concerns about a slippage in 2017-18 unless revenue mop-up goes up substantially and/or the government reins in spending in the last quarter. The deficit in the corresponding period of last year was 85.8%. A front-loading of expenditure following the Budget date advancement this year made the deficit figures up to November appear worse. A massive plunge in non-tax revenue and lower-than-expected goods and services tax (GST) collection caused a revenue shortfall, while both revenue expenditure and the more-productive capital spending inched up, driving up fiscal deficit to Rs 6.12 lakh crore against the full-year estimate of almost Rs 5.47 lakh crore, showed official data released on Friday. On Wednesday, the government had announced plans to borrow an extra Rs 50,000 crore through dated securities this fiscal. However, with direct tax collection still keeping with the desired trend, an increase in tax mop-up, PSU dividends and disinvestment receipts in the remaining months of the fiscal would be key to preventing a flare-up of the fiscal deficit, which was targeted at 3.2% of GDP in FY18. Already, at around Rs 36,768 crore, the Centre’s average monthly GST collection between July and November has been around Rs 6,000 crore lower than the desired level to achieve revenue neutrality. Since direct tax collections usually go up in the last quarter of a fiscal, the government may hope to see a repeat of the trend this year as well. However, in the case of GST, only eight months’ collections will be accounted for in the current year, though by March-end the new tax will have existed for nine months. Revenue deficit touched 152% of the Budget estimate for the full year during April-November. At 33% of the budgeted target up to November, the receipt of dividends and profits (a major part of non-tax revenue) trailed last year’s level of 70%. The subsidies payout, however, remained at 86% of the full-year target, a tad higher than a year before.
Apart from direct tax collection, higher disinvestment revenue provides some hope, especially after the Reserve Bank of India sharply cut its annual dividend to the government to Rs 30,659 crore from Rs 58,000 crore budgeted by the Centre and compared with Rs 65,876 crore transferred last year. Listing of insurance companies offered an extra Rs 17,357 crore up to November, while total disinvestment proceeds are expected to exceed Rs 1 lakh crore this fiscal, higher than the budgeted level of Rs 72,500 crore. At 86% of the budgeted level, subsidies payout up to November remained just around the same level of the budget estimate as last year. Subsidies apart, the April-November period also saw capital expenditure at Rs 1,84,115 crore, or 59.5% of the budget level and higher than 57.7% a year before. A significant chunk of this was related to the defence sector. Other departments that benefited from the front-loading of expenditure included roads, agriculture, urban development, housing and railways, all priority areas of the government. However, after front-loading in initial months, the growth in capex has slowed a bit to keep pace with the target. Due to faltering GST collection, the Centre’s net tax revenue, after transfer of states’ share, stood at Rs 6,99,392 crore, or 57% of the target. Nevertheless, it still remained close to last year’s level of 58.9% of the Budget estimate. Primary deficit, fiscal deficit minus interest payments that reflects government’s efforts at bridging the fiscal gap during a financial year, has worsened this fiscal. At Rs 3,02,306 crore, it worsened to 1288.9% of the Budget target. The government’s total expenditure was Rs 14.78 lakh crore at November end, or 68.9% of the Budget estimate, against 65% a year ago. Revenue expenditure, including interest payment, was 70.5% of the B estimate during April-November, compared with 66.1% a year earlier.
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