The Centre’s fiscal deficit for the first two months of 2019-20 came in at Rs 3.66 trillion, or 52 per cent of the full-year target of Rs 7.04 trillion.
It was 55.3 per cent for the same period last year.
Ahead of the Union Budget on July 5, which will be the first by new Finance Minister Nirmala Sitharaman, the data released by the Controller General of Accounts (CGA) on Friday showed the fiscal deficit for April-May was kept in reasonable check in spite of heavy frontloading of expenditure.
This was done by keeping spending in ministries such as Agriculture, Civil Aviation, Coal, Power, Road Transport, Rural Development, and Steel at a much lower level than in the same period last year.
For example, spending by the Ministries of Fertiliser and Petroleum in April-May was 31 per cent and 35 per cent, respectively, of the full-year allocations, compared to 15 per cent and 21 in the same period last year, to account for some portion of pending subsidies from last year, the data showed.
However, to counter that, spending by Agriculture was at 13 per cent of the full-year allocation compared to 29 per cent in April-May last year.
Civil Aviation was at 14 per cent compared to 60 per cent, Coal 1 per cent compared to 20 per cent, Power 8 per cent compared to 29 per cent, Road Transport nearly nil compared to 26 per cent, Rural Development 22 per cent compared to 32 per cent, Steel 3 per cent compared to 13 per cent, and Textiles 5 per cent compared to 28 per cent, the data showed.
Overall, the CGA data showed the revenue receipts of the government during April-May 2019-20 were 7.3 per cent of the Budget estimates. In the year-ago period, the revenue receipts were at a similar level.
Expenditure during the April-May period stood at Rs 5.12 trillion or 18.4 per cent of the Budget estimates. It was 19.4 per cent in the corresponding period of the last fiscal year. However, capital expenditure was only 14.2 per cent of the full-year target as compared to 21.3 per cent for the same period last year.
As reported earlier, Sitharaman is likely to forecast a fiscal deficit target for 2019-20 at 3.4 per cent of GDP. This target will be retained from the Interim Budget, which was presented on February 1.
The challenge for the government is to meet this target in the face of expected tax revenue shortfalls, limited room for disinvestment, and higher expenditure commitments.
“Based on the current trend in GDP and tax and non-tax revenue growth, adhering to the fiscal deficit target will be difficult without squeezing expenditure,” Sunil Sinha, principal economist of India Ratings, said in a research note on Friday.
“It would be interesting to look at the measures the Budget will announce to expand the tax base and resolve the tax revenue currently in disputes. Even after several simplifications and alterations, India’s direct tax laws are still complex and replete with various types of exemptions,” Sinha said, adding that fiscal consolidation must continue in line with the fiscal road map.