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Data for the Centre's fiscal deficit for the first five months is slated to come today, at a time when the Finance Ministry is quite confident of reining in the deficit at 4.8% of GDP as targeted in the Budget. However, the Centre's fiscal deficit has already touched about 63% of Budget Estimate in just four months of the current financial year.
To be precise, the deficit for the first four months of this financial year soared to Rs 3.4 lakh crore, 62.8% of the Budget estimate (BE) of Rs 5.42 lakh crore for 2013-14, amid slowing tax revenues and rising Plan expenditure.
In the corresponding period last year, the deficit was 51.5% of the BE for 2012-13. However, in 2012-13, the government was able to rein in the deficit at 4.9% of gross domestic product (GDP), against the BE of 5.1%, owing to a massive cut in Plan expenditure.
Earlier, Finance Minister P Chidambaram had said the target of reining in fiscal deficit at 4.8% of GDP this financial year was a red line that wouldn’t be breached. The data for the first four months had shown that he had a difficult task at hand. In the April-July period this year, it was particularly Plan expenditure that increased the fiscal deficit — it stood at Rs 1.49 lakh crore, 27% of the BE of Rs 5.55 lakh crore. In the corresponding period last year, it stood at 21.9% of the BE.
Non-Plan expenditure accounted for 33.5% of BE, at Rs 3.71 lakh crore. In the year-ago period, it accounted for 33.3% of BE.
On the revenue side, taxes yielded just 16.4% of the BE in the first four months of 2013-14, at Rs 1.45 lakh crore. In the year-ago period, this percentage stood at 18.5%. Analysts blamed this on slowing economic growth.
Tax receipts are expected to see an impact of the slowdown in growth. The Centre’s non-debt capital receipts yielded just 6.6% of BE, against 9.7% in the year-ago period. The government collected Rs 4,401 crore of such receipts, against Rs 66,468 crore pegged in the BE. Of this, disinvestment yielded only Rs 93.9.34 crore, against Rs 40,000 crore estimated in Budget 2013-14.
Given that real GDP growth is not expected to exceed six% this financial year and Wholesale Price Index-based inflation might remain at about six%, nominal economic growth might not exceed 12%. In the Budget, this growth was estimated at 13.5%, against the previous year. With low growth, in absolute terms, any fiscal deficit would seem large, as percentage of GDP.
Revenue deficit or the gap between current expenditure (which doesn’t add to asset creation) and current receipts, touched 73% of BE in the April-July period, against 61.3% in the corresponding period last year.
