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An enormous rise in Plan expenditure has pushed the central government’s fiscal deficit to 74.6 per cent of the entire year’s Budget estimate (BE) at the end of only the first five months of the current financial year.
The finance ministry has already said it has drawn a red line over a deficit of 4.8 per cent of gross domestic product (GDP) for 2013-14, against 4.9 per cent in 2012-13.
The fiscal deficit in the first five months of a financial year was higher than 75 per cent of BE only in 2008-09, when the global financial crisis began. But that year, BE was just 2.5 per cent of GDP and it turned out to be more than eight per cent when the year ended.
Data released by the Controller General of Accounts on Monday showed the deficit at Rs 4.05 lakh crore during April-August against the BE of Rs 5.43 lakh crore for FY14.
At this point last year, the deficit was 65.7 per cent of the BE (and 5.1 per cent of GDP). It was largely due to a heavy dose of cuts in Plan expenditure that the government was able to rein in the deficit at 4.9 per cent of GDP in 2012-13.
Plan expenditure has ballooned, with expenditure on this count at Rs 1.83 lakh crore, constituting 33 per cent of the Rs 5.55 lakh crore in BE. Plan expenditure had accounted for 28.4 per cent of GDP at this time in 2012-13.
The other parameters rose at about the same pace as in the first five months of the previous year, except non-debt capital receipts and tax receipts. Non-tax revenues were higher as a percentage of GDP this time.
Non-Plan expenditure was Rs 4.8 lakh crore or 43.2 per cent of the Rs 11.1 lakh crore in the BE. It had been 43 per cent of BE in April-August of 2012-13, too.
Largely because of anomalies in Plan expenditure, total outlay was Rs 6.63 lakh crore in the first five months of the financial year, 39.8 per cent of the Rs 16.65-lakh-crore BE. It accounted for 37.9 per cent of BE in the first five months of 2012-13.
The Centre collected Rs 1.83 lakh crore from taxes in April-August, 20.8 per cent of the Rs 8.84 lakh crore in the BE for 2013-14. The collections had constituted 22.7 per cent of BE in the corresponding period of 2012-13. Slower growth in the economy is leading to a fall in their growth.
The economy grew only 4.4 per cent in the first quarter of this financial year.
Inflation is also less; the Budget had estimated nominal GDP to grow by 13.4 per cent in 2013-14, which does not seem the case now. If nominal GDP growth comes down, it will also magnify a given fiscal deficit as a percentage of GDP.
The government mopped Rs 68,786 crore from non-tax revenue, 39.9 per cent of the BE at Rs 1.72 lakh crore. It had constituted 29 per cent of BE in the first five months of 2012-13.
Non-debt capital receipts were just Rs 5,813 crore, representing 8.7 per cent of BE at Rs 66,468 crore. The receipts under this head had accounted for 12.2 per cent of BE at this point.
Within the category, disinvestment could yield just Rs 1,434 crore, four per cent of the BE provision of Rs 40,000 crore. The figures were low last time, too, at only five per cent of BE.
Taken together, receipts in the first five months of the current financial were almost the same as the corresponding period of 2012-13 in terms of proportion of BE.
These were Rs 2.58 lakh crore in April-August or 23 per cent of BE at Rs 11.2 lakh crore. These receipts had accounted for 23.3 per cent of BE this time in 2012-13.
The Centre revenue deficit, the gap between current expenditure and receipts, was Rs 3.32 lakh crore. This was 87.4 per cent of the BE at Rs 3.79 lakh crore. It was 79.2 per cent of BE this time last year.
