NDA govt deviated from the fiscal road map in 2016-17, says CAG report

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Despite committing to the path of fiscal consolidation, the government failed to meet its fiscal and revenue deficits targets in 2016-17, noted the Comptroller and Auditor General (CAG) of India in its latest report. As seen in Chart 1, as against the revenue, fiscal and effective revenue deficit targets of 2.1, 3.3 and 0.9 per cent of GDP in 2016-17 respectively, the achievement was 2.1, 3.5 and 1 per cent of GDP respectively.

In its report, the CAG has also made some stinging observations on the Centre's compliance with the Fiscal Responsibility and Budget Management (FRBM) Act 2003. 

First, as seen in Chart 2, there is marked variation in the fiscal deficit numbers presented in the budget and those derived from annual financial statements/union government’s finance accounts noted the CAG. 

Second, direct tax refunds have risen sharply over the past few years from Rs 90,432 crore to Rs 1.72 trillion in 2016-17 as shown in Chart 3. But as the CAG noted, no corresponding disclosure was available in the Government accounts. 

Third, the government has increasingly resorted to off-budget financing of expenditure. For instance, on the revenue side, off-budget financing through borrowings used for covering and deferring fertiliser arrears/bills (Chart 4) and arrears of FCI (Chart 5). 

Similarly, on the capital side, off-budget financing of railways carried out through IRFC borrowings are outside budgetary control. They are not part of calculation of fiscal indicators despite fiscal implications. Fourth, actual government liabilities are higher than what was shown. 

As seen in Charts 6 and 7, taking into account the understatement of Public Account liability of Rs 7.6 trillion, total liability of the Central Government at the end of the financial year 2016-17 works out to 50.5 per cent of GDP rather than 45.5 per cent. 

This was against the project of 47.10 per cent presented in the Medium term fiscal policy statement 2016-17.


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Report on Compliance of the Fiscal Responsibility and Budget Management Act, Comptroller and Auditor General of India;
 compiled by BS Research Bureau

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