Data on fiscal deficit for first 7 months to be out today

Likely to aggravate problems for the govt

Data showing dwindling Centre's finances in the first seven months of the current financial year will be released later today. The finance ministry has time and again said that the Budget Estimate (BE) of reining in the Centre's fiscal deficit at 4.8% of GDP is a red line. However, the data for the first six months belied that optimism.

The BE pegged the deficit at Rs 5.4 lakh crore,  which according to the finance ministry's assumption that time came to 4.8% of GDP. However, the  gap between expenditure and revenues of the Union government has already widened to 76% of BE.

Besides, the budget had assumed nominal GDP to grow by 13.4% with a break up of 6.4% of real GDP and 7% of inflation in 2013-14. Now, nobody is pegging the GDP to grow over  even 5%, except for the finance ministry. Wholesale price inflation stood at 7% in October.  Even if one assumes that inflation remains at average 7%,  nominal GDP is not  likely to grow over 12%. The lower GDP will magnify any given amount of fiscal deficit as a percentage of GDP.    

Analysing the data for the first half, one will find that tax receipts stood at just little over Rs 3 lakh crore, constituting 34.8% of budgeted Rs 8.84 lakh crore. At this point of time, tax receipts had accounted for 38.1% of the budgeted amount in the previous financial year. One may argue that the gap between April-September this financial  year and that of 2012-13 is not as high and can be bridged in the next six months. However, it should be noted that even at 38.1% of the Budgeted amount, tax receipts fell short of BE by almost 30,000 crore last financial year.

Even then, the government was successful in containing the fiscal deficit  at 4.9% of GDP, much lower than budget estimate of 5.1% and revised estimate of 5.2%, primarily because the government aggressively cut plan expenditure by over 17%. Analysts say that this time also the government will have to cut plan expenditure significantly, but the election year and slowing down economy would come in the way.
   
Sensing the tough environment, the government is not leaving any scope for lacunae on any other front. It is going to ask public sector enterprises to give it dividend to the tune of about Rs 30,000 crore as estimated in the Budget. For  this purpose, it will meet heads of PSUs in January. Besides, Rs 43,996 crore is estimated to come from PSU banks and transfer of surplus money by the RBI.

On disinvestment front, the government has only garnered about Rs 1,400 crore, which came from meeting the Sebi's requirement for minimum public float of 10%. No disinvestment has happened so far in true sense. The government has lined up around six companies for disinvestment which include IOC,  Power Grid, Hindustan Aeronautics,  Coal India Ltd and Engineers India Ltd. However, officials admitted that meeting disinvestment target of Rs 40,000 crore would be difficult.

The government has also planned to get Rs 18,000 crore from selling stake of Specified Undertaking of Unit Trust of India (SUUTI) in ITC, L&T and Axis Bank. For this purpose, it is going to rescind the earlier Cabinet order of closing down SUUTI.

Besides, it is planning exchange-traded fund of PSUs.

Despite all these steps, analysts say  that it would be difficult for the government to contain the Centre's fiscal  deficit at 4.8% of GDP. It will ultimately resort to carry forward some subsidies next  financial year. Oil marketing companies are already demanding Rs 1.45 lakh  crore of subsidies against  Rs 65 lakh  crore  pegged  in the  Budget.

Centre's  Finances for the first half of 2013-14
	Budget Estimate (BE) for 2013-14 in Rs cr	Actual during April-September in Rs cr	Actual As % of BE in 2013-14/2012-13
i) Total Receipts	1,122,799	396,962	35.4/36.5
Of which a) Tax Receipts	884,078	307,589	34.8/38.1
b) Non-Tax Revenues	172,252	82,315	47.8/34.7
c) Non-Debt Capital Receipts	66,468	7,058	10.6/15
ii)Total Expenditure	1,665,297	809,050	48.6/46.5
Of which a) Plan Expenditure	555,322	236,116	42.5/38.9
b) Non-Plan Expenditure	1,109,975	572,934	51.6/50.7
Fiscal Deficit (2-1)	542,499	412,088	76/65.6
Note: Receipts do not include market borrowings as these are used to finance fiscal deficit
Source: Controller General of Accounts