In other words, the revised fiscal deficit estimate of 4.6 per cent of GDP for the full year of 2013-14 can be achieved only when the March numbers show a surplus of Rs 74,760 crore, compared to the average monthly deficit of Rs 54,482 crore recorded in the previous 11 months of the year. How feasible is that? Theoretically, this is of course possible, assuming that there is a massive cut in expenditure and revenues show a marked spurt in the last month of the year. However, it will be a tall task to make good a shortfall that is as large as 0.66 per cent of GDP. It may even require some accounting ingenuity.
Remember that never in the last decade and a half has the fiscal deficit number for the first 11 months of the year been more than the revised estimate for the full year. In 2013-14, the situation changed for the first time when the fiscal deficit for April-February clocked Rs 5.99 lakh crore, even as the revised estimate, released in February at the time of the interim Budget, showed the fiscal deficit for April-March 2013-14 at Rs 5.24 lakh crore.
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It is true that the revised fiscal deficit estimates for the full year are released in advance in February. This is based on the assumption made by the finance ministry about its revenues and expenditure commitments for March. Ideally, these assumptions should be realistic and one way of gauging how realistic they are is to check if the April-February deficit numbers are lower than the revised estimates. For the last 15 years, the April-February deficit numbers were always lower than the revised fiscal deficit numbers released by the finance minister while presenting the Budget in February in the respective years. The only exception took place in 2013-14, when the revised fiscal deficit estimate for the full year was lower than the April-February 2013-14 figures! No wonder questions about the credibility of the finance minister's claim have been raised.
Yet, there are some brave voices within the government that still argue that a savage cut in expenditure and a smart recovery in revenues during March 2014 are possible and could help the finance minister achieve his promised fiscal deficit number. They point out that the fiscal deficit numbers in both 2011-12 and 2012-13 were actually even lower than what were projected in the revised estimates, and that this was possible because of higher revenues and lower expenditure in the last month of each of the two years. Against a revised fiscal deficit of 5.9 per cent of GDP in 2011-12, the actual fiscal deficit was a tad lower at 5.7 per cent. And for 2012-13, the revised fiscal deficit was estimated at 5.2 per cent of GDP, but the actual number went down to 4.9 per cent. A reality check on what happened in the last two financial years should, therefore, give an interesting insight into this debate.
In 2011-12, the government's total actual receipts were down by Rs 8,365 crore over the revised estimates. However, its total actual expenditure in March 2012 was also brought down by a higher margin of Rs 14,355 crore. The net result was a 0.2 percentage point reduction in fiscal deficit. In 2012-13, the performance in March 2013 was spectacular - the government's total actual receipts increased by Rs 9,869 crore over what was projected in the revised estimates and actual expenditure was down by Rs 20,458 crore. The combined effect of a spurt in revenue collection and expenditure squeeze, achieved in the last month of the year, helped reduce the fiscal deficit further down by 0.3 percentage points to 4.9 per cent of GDP.
The challenge before Mr Chidambaram in 2013-14 would be to improve this performance several-fold. Can he do it? Two hurdles are likely to come in the way. One, the fact that the April-February 2013-14 fiscal deficit is already in excess of the full year's revised estimates by Rs 74,760 crore would require a bigger margin of expenditure squeeze and revenue increase. That will be a stupendous task. Two, preliminary estimates show that tax revenues have fallen short of around Rs 12,000 crore over the revised estimates and non-debt capital receipts have exceeded the estimates by a similar amount. While this - along with some expenditure cuts - will help, it is not yet clear if they would be enough to make good the huge shortfall of the first 11 months.
In his 1997-98 Budget, Mr Chidambaram had targeted a fiscal deficit of 4.5 per cent of GDP. However, when his immediate successor, Yashwant Sinha, who represented a different government, presented the 1998-99 Budget, he showed how the actual fiscal deficit for 1997-98 had ballooned to 5.8 per cent of GDP. Likewise, it seems the real story of the actual fiscal deficit for 2013-14 would be revealed when the next finance minister presents his Budget for 2014-15.