Fiscal deficit exceeds revised Budget estimates

Govt had in the budget for 2013-14 proposed to bring down the fiscal deficit to 4.8% of GDP

The Centre’s fiscal deficit in the first 10 months of the current financial year (FY14) stood at Rs 5,32,842 crore, breaching the Revised Estimate (RE) of Rs 5,24,539 crore for all of 2013-14, official data released on Friday showed.

At Rs 5,32,842 crore, the fiscal deficit is 101.6 per cent of the RE, against 89.4 per cent in the corresponding year-ago period, the numbers released by the Controller General of Accounts (CGA) revealed.

If revenue collections don’t grow at a much faster pace in the last two months of the financial year (February and March), fiscal deficit as a percentage of the gross domestic product might overshoot Finance Minister P Chidambaram’s RE of 4.6 per cent of gross domestic product given in the interim Budget earlier this month.

To meet RE projections, the government is pinning its hopes on the fourth and last instalment of advance tax collections, to be paid in March.

To rein in the deficit at the projected level, the minister might have to compress Plan expenditure further after it was slashed by about Rs 80,000 crore in the RE. This could affect growth ahead of the general elections in May-April.

According to economists, it is difficult to meet the RE but the fiscal deficit is unlikely to exceed the projections made in the BE  – 4.8 per cent.

Last year, the fiscal deficit was controlled at 4.9 per cent.

“The pick-up in the pace of tax growth in January 2014 is encouraging. However, based on the data for the first 10 months of the fiscal (FY14), excise and service tax collections appear likely to miss the revised targets for 2013-14. Net of the states’ share in Central taxes, we expect the shortfall in the Centre’s tax collections to be around Rs 10,000 crore,” said Aditi Nayar, senior economist at ICRA. In absolute terms, BE for fiscal deficit exceeds RE for 2013-14 by around Rs 14,000 crore.

According to the CGA data, the revenue deficit during April-January 2013-14 was Rs 3,78,850 crore or 102 per cent of the RE. Revenue receipts during the period were Rs 7,21,905 crore or 70 per cent of the RE. Total expenditure, on the other hand, was only 79.8 per cent of the RE at Rs 5,90,434 crore.

For the next financial year, the fiscal deficit is pegged at 4.1 per cent of the GDP, one percentage point lower than targeted in a fiscal consolidation map, even as the government cut excise duties to spur manufacturing, particularly the production of consumer durable goods, which fell for 13th month in a row in December.