India's fiscal deficit reaches at 86.5% of FY19 budget target in April-July

The Centre’s April-July fiscal deficit stood at Rs 5.40 trillion, or 86.5 per cent of the 2018-19 budgeted estimate of Rs 6.24 trillion, official data showed on Friday. This compared to 92.4 per cent for the same period last year, primarily on the back of higher non-tax revenue and lower administrative expenditure. 

The Centre, meanwhile exceeded the budget estimates for revenue deficit by 6.3 per cent in the first four months of FY’19. However, this was lower than 31.2 per cent in a year ago period.

With GDP data for the April-June period now available, fiscal deficit for Q1FY19 was 9.6 per cent of GDP. The Centre has targeted fiscal deficit of 3.3 per cent of GDP for the full year. As norm, the Centre’s expenditure is front-loaded in H1, while revenues (tax revenues), come in H2. 

“Revenue growth stood at a healthy 15 per cent in April-July, outpacing the 9 per cent rise in revenue expenditure and allowing for a robust 17 per cent expansion in capital outlay.  But for July, while revenue expenditure recorded a considerable 21 per cent growth, capital spending displayed a contraction of 9 per cent,” said Aditi Nayar, principal economist at ICRA. Total revenue for April-July was Rs 3.49 trillion, or 19.2 per cent of the full-year target, against 19 per cent for the same period last year. Net tax revenue was Rs 2.92 trillion, or 19.8 per cent of the full-year estimates, compared to 21 per cent in the same period last year. Non-tax revenue was 17.6 per cent of the year’s estimates, against 11.5 per cent last year.

Total expenditure for April-July was nearly Rs 8.90 trillion, or 36.4 per cent of the full-year target, compared to 37.7 per cent last year. Capex was Rs 1.11 trillion, or 37 per cent of the budgeted estimates, compared to 30.8 per cent. Revenue expenditure stood at Rs 7.78 trillion, or 36.3 per cent of estimates, compared to 38.8 per cent last year. “The year-on-year decline in the tax revenues in the month of July 2018, relative to July 2017, appears to have been led by the provisional settlement of a portion of unsettled IGST balances between the Centre and states,” said Nayar.

Nayar added that concerns remain. “The market will continue to monitor the likelihood of meeting the budgeted targets for revenues related to GST, dividends and profits, and disinvestment, and then assess if outlays required for revised MSPs, NHPS, fuel and other subsidies, and bank recapitalisation are adequate,” she said.

She said that while fiscal slippage in the current fiscal year may not necessarily arise, there was the risk of capital spending being curtailed to prevent breaching of fiscal deficit targets.