Fiscal deficit breaches full-year target by 21.5% in 10 months

Capital expenditure contracts 13% in April-January period

With indirect tax collections remaining sluggish in the first 10 months of the current financial year, the Centre’s fiscal deficit at the end of January stood at Rs 7.7 trillion, or 21.5 per cent more than the revised target of Rs 6.34 trillion, showed the data released by the Controller General of Accounts (CGA) on Tuesday.

To contain the deficit, the axe has fallen on capital expenditure, which contracted by 35 per cent in January alone. Capital expenditure has been contracting since September 2018. 

The government had earlier pegged the deficit at Rs 6.24 trillion for 2018-19 or 3.3 per cent of GDP. In the interim Budget for 2019-20, the deficit was revised upwards to Rs 6.34 trillion or 3.4 per cent of GDP. 

At the aggregate level, the Centre’s gross taxes revenues rose to Rs 15.62 trillion over the April 2018-January 2019 period, up 7.3 per cent from Rs 14.55 trillion over the same period last year. 

But while direct tax collections continued to grow at a healthy pace, indirect tax collections remained poor.  Direct tax collections grew at a robust 15.7 per cent, with corporation tax and income tax collections increasing at 16.7 per cent and 14.3 per cent, respectively. 

But indirect taxes were a reason for worry. The CGA data showed that the central goods and services tax (CGST) collections stood at Rs 3.75 trillion at the end of January. In comparison, the recent Budget had revised the CGST collection target to Rs 5.03 trillion in 2018-19, which was Rs 1 trillion lower than the earlier budget target of Rs 6.03 trillion. 

Non-tax revenues stood at Rs 1.62 trillion or 66 per cent of the revised Budget target of Rs 2.45 trillion, compared to 52.7 per cent over the same period in the previous financial year.

On the disinvestment front, the data showed that till January, the government had achieved only Rs 35,606 crore or 44.5 per cent of its disinvestment target of Rs 80,000 crore. But, the government is confident of meeting the target by the end of the current financial year. 

Devendra Pant, India Ratings chief economist, said the government has already mopped Rs 56,068 crore so far. Further, the PFC-REC merger could help it achieve the revised target.

He said based on the past trends in revenue collections, it was difficult to understand how the government would meet its revised revenue collection target, though revenue from GST compensation cess could help to some extent. 

"Non-tax revenue has grown strongly and will benefit from the RBI's interim dividend," he added. The RBI Board has approved of Rs 28,000 crore interim dividend to the Centre. 

On the other hand, total expenditure has grown by 8.7 per cent in the first 10 months of the current financial year.

The pressure to achieve the revised fiscal deficit target showed up in the capital expenditure numbers, which contracted by 13 per cent till January over the same period last year. 

The CGA data also showed that the Centre has already spent 98 per cent of its full year’s budget on major subsidies, with expenditure on both food and petroleum subsidy touching 99 per cent of the revised budget estimates.