Fiscal deficit reaches 86% of BE in first 8 months

The Centre’s fiscal deficit in the first eight months of the current financial year (April-November 2016) touched 85.8 per cent of the Budget Estimates for 2016-17, compared to 87 per cent at this point of time in the corresponding year-ago period. The improvement recorded this year is thanks to better tax receipts. 

The government did not squeeze capital expenditure in November to compress fiscal deficit, which was the case a few months ago. Capital expenditure needs to be stepped up further as the economy came under the pressure of demonetisation. In absolute terms, fiscal deficit touched the Rs 4.58 lakh crore mark during April-November 2016 against the Budget Estimate of Rs 5.34 lakh crore. 

 

It means that the government will have the space to spend only Rs 76,000 crore over its receipts in the next four months to keep the target of controlling the deficit at 3.5 per cent of GDP. It was primarily tax receipts that helped the government boost its revenues and made up for the shortfall in other streams.

Tax receipts were Rs 6.21 lakh crore, constituting 58.9 per cent of the BE at Rs 10.54 lakh crore. This was higher than just 50.5 per cent in the year-ago period. On other heads, non-tax revenues were only 54.2 per cent of BE this time against 78.1 per cent in the first eight months of the previous financial year. Non-debt capital receipts were 48.5 per cent of BE, compared with 25.8 per cent in FY16. 

Aditi Nayar, principal economist at ICRA, said: “The Government’s tax collections displayed a healthy growth in November 2016 on a small base. Disclosure of income under the Pradhan Mantri Garib Kalyan Yojana would support the government’s tax revenues in the remainder of the year, offsetting likely shortfalls in non-tax revenues and disinvestment receipts, and preventing a fiscal slippage.”  

Capital expenditure rose 11.5 per cent in November at Rs 17,388 crore. However, because of contraction in earlier months, the asset generating outlay fell 10.43 per cent in the first eight months of FY17. 

The government has so far spent less than 60 per cent of the capital expenditure pegged in BE. “The continued contraction in capital spending remains a concern. While there is substantial headroom for the government to incur capital spending, with less than 60 per cent of the budgeted target completed in the first eight months of this financial year, it is unclear whether the pace of spending will improve meaningfully in the remainder of the year,” Nayar noted. Revenue expenditure was, however, higher by 16.36 per cent at Rs 11.44 lakh crore in the first eight months of the current financial year compared to the year-ago period owing to the implementation of Pay Commission recommendations.