April-Feb fiscal deficit at Rs 7.15 trillion, 120% of FY18 target

The Centre’s April-February fiscal deficit came in at Rs 7.15 trillion, a staggering 120.3 per cent of the full-year Revised Estimates (RE) of Rs 5.95 trillion. The official data was released on Wednesday. With numbers for March unreleased, meeting the revised fiscal deficit target of containing the deficit at 3.5 per cent of gross domestic product for the year will be an uphill task minus the expenditure squeeze.

However, the finance ministry asserted that the target will be met, which means expenditure might be curtailed substantially or carried forward to next year. 

The fiscal deficit rose primarily on the back of lower non-tax revenues, which came in at 60 per cent of full-year target, compared with 62.4 per cent for the same period last year. Due to lower-than-expected dividends from state-owned companies and lenders, the dividend target for 2017-18 was revised downwards to Rs 1.06 trillion, from Rs 1.46 trillion. There is uncertainty regarding that as well, as the Reserve Bank of India may still refuse to pay the extra Rs 130 billion in surplus that the Centre is asking from it.

Fiscal deficit for April-February 2016-17 was 113.4 per cent of the full-year Budget Estimates.

Finance Secretary Hasmukh Adhia said that the finance ministry on Wednesday reviewed the fiscal position of the entire financial year. “We are meeting the fiscal deficit target. We are very optimistic. Today, we reviewed the position. We shall meet the target,” Adhia told reporters.

Aditi Nayar, principal economist, Icra, said notwithstanding the healthy growth in the Centre’s tax revenue and disinvestment proceeds in April 2017-February 2018 relative to the expansion in total expenditure, the fiscal deficit printed 20 per cent higher than the RE for FY2018 on account of lagging non-tax revenues.

She said that the extent to which the non-tax revenues can be shored up in March 2018 would crucially determine if fiscal deficit breaches the RE.

“Moreover, total expenditure needs to contract by 2 per cent on a year-on-year basis in March 2018, to avoid exceeding the level included in this year’s RE,” Nayar said.

Total expenditure for April-February was 90 per cent of full-year RE, compared with 87 per cent last year. Capital expenditure shot up to 109 per cent of the year’s target, compared with 77 per cent last year. 

As a percentage of yearly RE, tax revenues were at the same level, compared to last year, but total receipts were 79 per cent of full-year target, compared with 77 per cent last year.

Icra’s Nayar said that the new fiscal deficit data may lead to a rise in yields of government securities, reversing some of the easing recorded after the Centre announced an easier-than-anticipated borrowing calendar for the first half of 2018-19.