 "Revenue deficit target for FY14 surpassed in only eight months")
The Budget had pegged the revenue deficit at 3.3 per cent of GDP in 2013-14 and fiscal deficit at 4.8 per cent. The revenue deficit, the gap between expenditure not incurred for capital generation over receipts, stood at 103.5 per cent of the BE till November of FY14, according to CAG data. At this point of time, the deficit was 91.2% of BE in 2012-13.
The fiscal deficit, on the other hand, during April-November was, in fact, 93.9% of BE against 80.4% in the corresponding period of the previous year.
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In absolute terms, revenue deficit stood at Rs 3.93 lakh crore during the period against 3.79 lakh crore, pegged in the BE for entire 2013-14.
The fiscal deficit touched Rs 5.09 lakh crore against Rs 5.42 lakh crore projected in BE.
In some sense, revenue deficit is a bigger worry than fiscal deficit since the former means that the government is borrowing to fund its consumption. Fiscal deficit, on the other hand, reflects capital expenditure as well so some parts of the borrowing goes to generate assets.
CRISIL chief economist D K Joshi said," both the deficits are worrying aspects of the public finance. It shows fiscal strain in the economy."
Data showed that slowing down economy had impact on the public finance. Tax receipts stood at Rs 3.96 lakh crore till November, constituting 44.8% of BE at Rs 8.84 lakh crore. At this point of time, the receipts accounted for 47.9% of BE in 2012-13. Even then, tax collections fell short of about Rs 30,000 crore in the entire year.
Among other receipts, disinvestment yielded the exchequer just Rs 1,589 crore, which is 4% of Rs 40,000 crore estimated in the Budget.
Officials admitted the Budget target of Rs 40,000 crore from disinvestment proceeds this year would be difficult to meet, but if some of the big-ticket issues like Indian Oil Corporation (IOC) and Coal India Ltd (CIL) hit the market, the proceeds would be similar to about Rs 24,000 crore raised last year. Besides Rs 40,000 crore through direct disinvestment, the government set a target to raise Rs 14,000 crore from equity stake sale by SUUTI in non-government companies.
Last year, the government resorted to heavy cuts in plan expenditure to rein in fiscal deficit at 4.9% of GDP, much lower than 5.1% pegged in the Budget and 5.2% projected in the Revised Estimate.
Till November this financial year, plan expenditure was at Rs 2.9 lakh crore, representing 52.4% of BE at Rs 5.5 lakh crore. It was much higher than 46.7% in the corresponding period of 2012-13.
Non-plan expenditure was also bit higher as percentage of BE in the first eight months of the current financial year. It stood at Rs 7.30 lakh crore, about 65.8% of BE at Rs 12 lakh crore. The percentage stood at 64.4% in the corresponding period last year.
The moot point is whether the government would be able to rein in fiscal and revenue deficits at the targeted level or not. If not, it would give a wrong signal to rating agencies to lower India's grades below the investment grade. However, the finance ministry is hopeful that the deficits would be checked as revenues mostly come later in the year and expenditures are incurred in earlier part.
Joshi said the government will have to take hard steps to control expenditures to meet the budget targets. CRISIL is estimated fiscal deficit at 5.2% of GDP this financial year and is not revisiting it as of now.
However, the economist also cautioned that too much of austere measures also take a toll on economic growth. "The government will have to come out with a mid-term strategy to rein in the deficits by cutting subsidies and not cutting those expenditure crucial for growth," he said.