More headache on fiscal deficit front

Official data released on Friday showed the Centre’s fiscal deficit touched Rs 1.80 lakh crore in the first two months of the current financial year. The figure represents one-third of the Budget Estimate of Rs 5.42 lakh crore for the entire 2013-14.

The figures, released by the Controller General of Accounts (CGA), revealed in the corresponding period of 2012-13, the Centre’s fiscal deficit had stood lower at 27.6 per cent of BE.

It should be noted here that BE was quite high at 5.1 per cent of gross domestic product (GDP) for 2012-13, though it actually came down to 4.9 per cent of GDP. It was only towards the end of 2012-13, when the government started drastically cutting plan expenditure, that the fiscal deficit could be pruned to that level. Otherwise, in the initial year, it was leapfrogging. The very fact the deficit stood higher in the first two months of the current financial year when compared to the corresponding period of the previous financial year, shows the government would have to seriously augment resources or cut expenditure to stick to this financial year's target of cutting fiscal deficit to 4.8 per cent of GDP.

It was primarily tax revenues that took a toll on the fiscal deficit. For April-May, tax revenues stood at Rs 36,030 crore, which was just 3.1 per cent of BE of Rs 8.84 lakh crore. In the corresponding period of 2012-13, tax revenues had constituted 5.3 per cent of BE.

Pulled down by higher refunds, corporate tax collections were just Rs 3,232 crore in the April-May period, sharply lower by 68 per cent over Rs 10,137 crore in the corresponding period of 2012-13.

In fact, corporate tax collections were negative Rs 2,136 crore in the first month of this financial year, as refunds were higher than mop up.

Similarly, excise duty could fetch only Rs 6,808 crore to the government kitty in the first two months of the current financial year, 63 per cent less than Rs 10,820 crore a year ago.

Besides, an almost negligible amount was carried forward for the first two months of the current financial from last year out of Rs 40,000 crore pegged from direct disinvestment of government equity in public sector units in BE.

These heads pulled down revenue receipts to Rs 36,030 crore, which constituted 3.4 per cent of the Budget target of Rs 10.56 lakh crore. By this time, revenues stood at 5.1 per cent of BE in 2012-13.

Juxtaposed against total expenditure of the Centre at Rs 2.17 lakh crore, this gave us the fiscal deficit figure for the first two months of 2013-14. Expenditure accounted for 13.1 per cent of BE of Rs 16.65 lakh crore against 12.8 per cent in the corresponding period of 2012-13.

Within expenditure, non-plan head stood at Rs 1,49,046 crore in April-May, which constituted 13.4 per cent of Rs 11,09,975 crore projected in BE. By this time, non-plan expenditure had constituted 15.1 per cent in the first two months of last financial year.

Plan expenditure, which bore the brunt of the government's expenditure compression measures, was at Rs 68,309 crore, 12.3 per cent of BE of Rs 5,55,322 crore. In 2012-13, it was 8.6 per cent of BE.

Revenue deficit, which is a gap of the government's current expenditure over current receipts, was at Rs 1,44,868 crore, 38.1 per cent of BE at Rs 3,79,838 crore. In the first two months of 2012-13, this part of deficit was at 33.8 per cent of BE.

India's current account deficit was sharply lower at 3.6 per cent of GDP in the fourth quarter of 2012-13 against 6.7 per cent in the third quarter. Though for the entire 2012-13, current account deficit was still at 4.8 per cent, it was lower than expectations of five per cent.