Fiscal deficit at 76.4% of BE in first five months of FY17

In August, capital expenditure rises after falling in the first 4 months

The Centre's fiscal deficit in the first five months touched 76.4 per cent of the Budget estimates for 2016-17, nearly 10 percentage points higher than 66.5 per cent in the corresponding period of the previous financial year.

An encouraging factor was that the government's capital expenditure rose in August (year-on-year) but cumulatively it was still down due to a contraction in the first four months.

In absolute terms, the deficit was at Rs 4.08 lakh crore in the first five months of 2016-17 against Budget estimates of Rs 5.34 lakh crore, according to the Controller General of Accounts data released in Friday. The deficit for the full year has been pegged at 3.5 per cent of gross domestic product (GDP).

However, the pace of rise in the fiscal deficit slowed down as it was already 73.7 per cent in the first four months and 61.1 per cent in the first three months. For April-July 2016, the number stood at Rs 3.93 lakh crore, nearly 74 per cent of the budgeted estimates for 2016-17, against 69.3 per cent in the year-ago period.

Expenditure is traditionally front-loaded. Besides, government's expenditure rose more on capital expenditure in August than revenue expenditure.

Capital expenditure was 3.5 times more at Rs 19,949 crore in August against Rs 5,412 crore in the year-ago period. On the other hand, revenue expenditure was slightly more at Rs 1.24 lakh crore against Rs 1.23 lakh crore in the year-ago period.

Capital expenditure denotes money incurred on asset generating projects, while revenue expenditure is on immediate needs such as salaries and pensions. The August figures were encouraging as the government started paying higher salaries and pensions from August due to the implementation of the Seventh Pay Commission recommendations. The government exchequer would see a hit of Rs 84,000 crore this financial year.

"The increase in capital spending in August 2016 is enthusing, given the contraction seen in the first four months of this financial year," said Aditi Nayar of ICRA.

She said this would provide some traction to gross fixed capital formation growth in the second quarter of FY17, which was lacklustre in the first quarter.

However, cumulatively for April-August 2016-17, capital expenditure declined 0.11 per cent, while revenue expenditure rose 11.01 per cent year-on-year.

Total expenditure stood at Rs 8.02 lakh crore which was 40.5 per cent of BE, lower than 41.2 per cent in the previous year's first five months.

Tax receipts during April-August of 2016-17 stood at Rs 2.8 lakh crore, representing 26.6 per cent of the Budget estimates. The proportion was much higher than 22.8 per cent in the corresponding period of the previous financial year.

Mop-up from non-tax revenue, including spectrum proceeds, was at Rs 1.05 lakh crore, which was 32.5 per cent of BE. The proportion was almost half of 61.2 per cent in the corresponding period of the previous year. However, the revenue improved substantially from Rs 34,098 crore till July of this year.

Non-debt capital receipts were at Rs 8,518 crore, accounting for 12.7 per cent of BE. It was quite less than 21.6 per cent a year ago. However, disinvestment proceeds, which is part of non-debt capital receipts, were Rs 21,000 crore till September and hence the data of fiscal deficit may show quite an improvement under this head.

Total receipts were at Rs 3.94 lakh crore in five months of the current financial year, constituting 27.3 per cent of BE. The pace was slower than last year when receipts accounted for 29.7 per cent of BE.