Millennium Post

7-month fiscal deficit at 89.6% of full-year target

Net tax receipts in the first seven months (April-October) of the current fiscal stood at over Rs 3.68 lakh crore, or 37.7 per cent of the BE, according to the data released on Friday by the Controller General of Accounts.

Total expenditure of the government during the seven months was over Rs 9.62 lakh crore or 53.6 per cent of the estimates for the entire 2014-15.

Of the total expenditure, Plan spending was at Rs 2.67 lakh crore. Under non-plan head, it was Rs 6.95 lakh crore. Revenue receipts were Rs 4.80 lakh crore or 40.4 per cent of the BE for the period.

Total receipts (from revenue and non-debt capital) of the government during the seven months were over Rs 4.86 lakh crore. The data showed that the revenue deficit during the period was over Rs 3.72 lakh crore or 98.5 per cent of the full year target.

For 2014-15, fiscal deficit - the gap between government expenditure and revenue - has been pegged at Rs 5.31 lakh crore or 4.1 per cent of GDP, the lowest in seven years.

The fiscal deficit was over Rs 5.08 lakh crore or 4.5 per cent of GDP in 2013-14. It was 4.9 per cent in 2012-13.

The government had put in place a fiscal consolidation roadmap as per which the fiscal deficit has to be brought down to 3 per cent of the GDP by 2016-17.

To reduce the fiscal deficit to the 7-year low level, the government had last month announced a slew of austerity measures aimed at cutting non-plan spending by 10 per cent.

With government borrowing touching 90 per cent of the budgeted target till October, leading brokerages have said this may force Finance Minister Arun Jaitley to announce another round of spending cuts.

Blaming high fiscal deficit to poor revenue receipts due to lower tax collection and lack of divestment proceeds, Nomura India chief economist Sonal Varma described the fiscal position as a ‘tighter spot’ and said the finance minister will be forced to announce more spending cuts over and above the 10
per cent he has already announced.

‘The finance ministry has implemented a mandatory 10 per cent cut in discretionary spending and it will also save on lower fuel subsidies in H2 due to the fall in oil prices. However, today’s data indicate, in our view, that the above measures may not fully offset the shortfall in tax revenues and lack of disinvestment. Therefore, additional spending cuts may be necessary to meet the fiscal deficit target,’ Varma said in a note. In a separate note, Citigroup India chief economist Rohini Malkani said trends in government finances remain weak and the present deficit is way above the five year average of 74 per cent in April-October period.

While the government has announced a 10 per cent cut in non-Plan expenditure, which is 0.3 per cent of GDP, we believe that the cuts are likely to be extended in Plan expenditure as well to the tune of 0.5 per cent of GDP for government to meet its fiscal targets,’ Malkani said.
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