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The Union finance ministry on Thursday said it was confident of meeting the target of reining in the Centre’s fiscal deficit at 4.1 per cent of the country’s gross domestic product (GDP).
This came a day after it was clear that the gap between expenditure and receipts in the first eight months of the current financial year had almost touched the Budget estimate (BE) for all of 2014-15.
Sources in the ministry said gross tax collection rose 14 per cent in these eight months (April to December) but net proceeds were hit by huge refunds. These collections were projected to increase almost 20 per cent to Rs 9.77 lakh-crore for 2014-15, compared to Rs 8.16 lakh-crore in 2013-14.
The sources said much of the government’s tax revenue comes in the financial year’s last quarter (January-March). Almost half of income tax is collected in this period, they added.
While direct taxes are said to be on track, indirect tax collection is lagging. Among the latter, excise duty collections have not been doing well, the sources said. In the worst-case scenario, they said the revenue shortfall would be Rs 1 lakh-crore. Of this, the states’ share is Rs 32 lakh-crore. Of rest, Rs 30 lakh-crore would be offset by expenditure cuts. The remaining Rs 38 lakh-crore would be met through other sources, including higher telecom spectrum auction proceeds, they said.
Data issued by the controller general of accounts on Wednesday showed the central government’s fiscal deficit totalled 98.9 per cent of the BE for all of 2014-15 in April-November, Rs 5.25 lakh-crore against a full-year’s BE of Rs 5.3 lakh-crore. For the corresponding period last year, the deficit was 93.9 per cent of the full-year BE. In other words, Finance Minister Arun Jaitley will in the January-March quarter have to enforce massive spending cuts. However, the sources said, these would not be as much as resorted to by previous finance minister P Chidambaram in 2012-13 and 2013-14. The latter had cut plan expenditure by Rs 1.4 lakh-crore in 2012-13 and Rs 1.02 lakh-crore in 2013-14.
The government has projected to bring the fiscal deficit to 4.1 per cent of GDP in the current financial year against 4.6 per cent the previous year.
