Modi govt meets revised fiscal deficit target of 3.4% for 2018-19

The Centre’s full year fiscal deficit for FY19 came in at Rs 6.45 trillion, slightly above the revised estimate of Rs 6.34 trillion, showed official data released on Friday by the Controller General of Accounts.


With gross domestic product (GDP data for FY19 also released on Friday, it was learnt that fiscal deficit stood at 3.39 per cent of the GDP, against a revised estimate of 3.4 per cent, mainly on account of an increase in non-tax revenue and lower expenditure. Hence, the fiscal deficit figure is above estimates in absolute terms, it is slightly lower as a percentage of GDP, due to expansion in the latter.


Additionally, the CGA also released the fiscal deficit data for April 2019, the first month of FY20. It stood at Rs 1.57 trillion, or 22.3 per cent of the full year target, compared to 24.3 per cent for the same period last fiscal year.


The revenue deficit for the entire FY19 came in at 108.2 per cent of the full year target, compared to 102 per cent for FY18. Revenue deficit excludes capital expenditure and capital receipts of the government.


“Fiscal deficit (for FY19) has been maintained at 3.4 per cent, as expected. However, the overall level of expenditure has been pruned, mainly due to a fall in tax revenue (both direct and indirect). The lower GST as well as corporate tax collections have contributed to this,” said Madan Sabnavis, chief economist at CARE Ratings.


“A repercussion is that the government has cut back on capital expenditure by around Rs 13,000 crore, which has affected overall investments in FY19, given that it was the major driver of investments in the country. The focus in FY20 will be to ensure that revenue increases, as the expenditure outlay on capex has to increase along with revenue expenditure, on account of cash transfers to farmers,” Sabnavis said.


For FY19, the total expenditure was Rs 23.11 trillion — about 94.1 per cent of the total revised budget size of Rs 24.57 trillion — compared to 96.6 per cent for FY18.


Revenue expenditure was 93.8 per cent of the full year target, compared to 96.6 per cent for FY18. Capital expenditure for the same period was 95.9 per cent of the full year target, compared to 96.2 per cent last year. Hence, there was contraction in both administrative and capital spending by a combined Rs 1.46 trillion.


Total revenue for FY19 was Rs 16.66 trillion, about Rs 1.57 trillion less than the revised estimates of Rs 18.23 trillion. Net tax revenue for FY19 came in at 88.7 per cent of the revised full year target, compared to 97.9 per cent for the same period last year. Non-tax revenue slightly exceeded the full year target, compared to 79.6 per cent last year.


Lower revenue collections were mainly on account of lower proceeds across the board — including integrated goods and service tax, customs, union excise duty and service tax, said Sabnavis.

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