Fiscal deficit, core sector boost for Modi govt ahead of RBI policy review

The Centre’s fiscal deficit for the April-June 2018 quarter came in at Rs 4.29 trillion, or 68.7 per cent of the 2018-19 budgeted estimate of 6.24 trillion, the official data released on Tuesday showed. This compares favourably to the fiscal deficit for the same period last year, primarily due to lower administrative expenditure and non-tax revenue.

The fiscal deficit was at 80.8 per cent of 2017-18 budgeted estimates in the April-June quarter of the last fiscal.

“The fiscal deficit for Q1 FY2019 recorded a mild year-on-year decline in absolute terms, with a robust 34 per cent expansion in revenue receipts and 27 per cent growth in capital expenditure,” said Aditi Nayar, Principal Economist at ICRA.

For 2018-19, the Centre’s fiscal deficit target is 3.3 per cent of gross domestic product, compared with provisional estimates of 3.53 per cent in 2017-18. 

According to the data released by the Controller General of Accounts (CGA), tax revenue for April-June was Rs 2.37 trillion or 16 per cent of the BE, compared to 14.5 per cent for the same period last year. The total receipts of the government were Rs 2.78 trillion during or 15.3 per cent of the BE, compared to 13.1 per cent for the same period last year.

Total expenditure during the first three months of the 2018-19 was Rs 7.07 trillion or 29 per cent of the budgeted estimates. The capital expenditure was Rs 870 billion or 29 per cent of the full-year target. Revenue expenditure was Rs 6.2 trillion, or 29 per cent of the full year-target, compared with 31.7 per cent for the same period last year, primarily on back of lower pending subsidy payments.

“The low growth in revenue spending was due to a contraction in outgo towards subsidies. Capital spending recorded a substantial growth in the first three months of this fiscal, led by sectors, such as roads and railways,” Nayar said.

Notwithstanding the mild improvement in the fiscal deficit relative to the year-ago level, various fiscal concerns persist, including whether the budgeted targets for GST revenues, dividends and profits and disinvestment would be realised, and whether the outlays required for revised MSPs, the National Health Protection Scheme, fuel and other subsidies, and bank recapitalisation would prove to be adequate,” Nayar said.