April-Oct fiscal deficit at 96% of Budget Estimate

Illustration by Ajay Mohanty
The Centre’s fiscal deficit for April-October, the first seven months of the financial year, was Rs 5.25 lakh crore or 96.1 per cent of the full-year target of Rs 5.46 lakh crore.


Incidentally, the deficit at the end of August was at the exact same level, which shows the finance ministry, after ‘front-loading’ of expenditure, has reined in spending and plans to do so further in the second half of 2017-18.


The deficit for April-October last year was 79.3 per cent of the 2016-17 full-year target. For April-September this year, it was 91.3 per cent.


Total expenditure for April-October was Rs 12.92 lakh crore or 60.2 per cent of the full-year estimate of Rs 21.47 lakh crore, official data showed on Thursday. Total expenditure for October was Rs 1.43 lakh crore, compared with nearly Rs 2 lakh crore in September. The Centre’s capital expenditure, too, has been reined in. It was Rs 16,406 crore in October, compared with Rs 36,741 crore in September. Revenue expenditure for October was Rs 1.27 lakh crore, compared with Rs 1.62 lakh crore in September.


Source: Controller General of Accounts
Finance Minister Arun Jaitley is aiming to stick to the deficit target of 3.2 per cent of gross domestic product (GDP) for 2017-18. After July-September GDP data was issued on Thursday as well, it can now be inferred that the fiscal deficit for that first half of the financial year was 6.3 per cent of April-September GDP (current prices), of Rs 79.06 lakh crore.


At an event here before the release of deficit data, Jaitley reiterated he intended to be on track to meet the target for this year. “The last three years, we have an exemplary record as far as maintaining that (fiscal) glide path is concerned. We intend to move on that track,” Jaitley said. This comes at a time when there is uncertainty within and outside the government on whether revenue from the nationwide goods and services tax (GST), rolled out from July 1, would be below expectation or not.


Analysts, however, were doubtful. “Inching up of the deficit for April-October 2017 highlights the lingering concerns related to the possibility of a fiscal slippage. The risk of one stems primarily from the growing likelihood that tax and non-tax revenues would undershoot the budgeted level,” said Aditi Nayar, principal economist at ratings agency Icra


Given the front-loading of expenditure in the early part of the year, said Nayar, capital outlay would have to contract by 16.8 per cent in the last five months of 2017-18 to avoid exceeding the Budget Estimate.


“There have been some disruptions in the form of GST, which has made the collection numbers complex, as the proceeds have to also be used to compensate states. Hence, the final impact on the central finances would be driven by how this matrix works out,” said Madan Sabnavis, chief economist at CARE ratings. He said unless additional resources were raised, there could be cuts in expenditure.


Net tax revenue for April-September was 51.6 per cent of the full-year target. Non-tax revenue, including dividends from state-owned entities, was only at 30 per cent of full-year estimates compared to 52 per cent last year. Non-debt capital receipts, which include disinvestment, were 45.7 per cent of the Budget Estimate.


“Dividends from financial and non-financial public sector enterprises would need to rise appreciably to avoid missing the target for FY18. There remains a moderate risk of shortfall relative to the dividends and profits that the government had budgeted for,” Nayar said.


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