Fiscal deficit exceeds Budget estimate in just 9 months

If revenues are not forthcoming, it is inevitable that Jaitley will have to enforce massive spending cuts

The Centre will have to keep its revenues above expenditure in the last quarter of the current financial year to rein in its fiscal deficit at 4.1 per cent of Gross Domestic Product (GDP) as the deficit has crossed the Budget Estimates (BE) in the first nine months itself. 

The fiscal deficit remained high despite softening oil  prices which enabled the government to raise excise duty twice  (till December) and reduce subsidies of the oil marketing companies as revenues  from other streams--taxes, disinvestment and spectrum---were not forthcoming.

The fiscal deficit data was released by the Controller General of Accounts (CGA) on Friday when another news of government collecting more than Rs 22,000 crore from disinvestment in Coal India Ltd came. 
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The official data showed the deficit stood at Rs 5.32 lakh crore during April-December of 2014-15, surpassing a full-year’s BE of Rs 5.31 lakh-crore by 0.2 per cent . For the corresponding period last year, the deficit was 93.9 per cent of the full-year BE. 

If revenues are not forthcoming, it is inevitable that Finance Minister Arun Jaitley will in the year’s final quarter (January-March) have to enforce massive spending cuts.

For the first nine months of 2014-15,  tax revenue of the Centre has been Rs 5.45 lakh-crore, about 55.8 per cent of the full-year BE of Rs 9.77 lakh-crore. For April-December last year, it was higher at 58.6 per cent of the full-year target. This is despite the government collecting more from two excise duty hikes on petrol and diesel in November and December. 

Non-tax revenue was Rs 1.48 lakh-crore, about 70 per cent of the full-year target of Rs 2.13 lakh-crore, compared to 67.5 per cent for the corresponding period last year. There should not be much problem under this head as the government expects to mop up targeted over Rs 45,000 crore from spectrum sale and other revenues in the telecom sector. 

Centre's finances in first  nine months of FY15
	Budget estimates for 2014-15 (Rs cr)	Actual for April-Dec (Rs cr)	April-Dec actual as % of BE in 2013-14/2014-15
I) Total receipts	12,63,715	7,00,407	57.7/55,7
a) Tax receipts	9,77,258	5,45,714	58.6/55.8
b) Non-tax revenues	2,12,505	1,48,059	67.5/69.7
c) Non-debt capital receipts	73,952	10,234	20.3/13.8
2)Total expenditure	17,94,892	12,36,388	69.9/68.9
a) Plan expenditure	5,75,000	3,52,631	63.3/61.3
b) Non-Plan expenditure	12,19,892	8,83,757	73.2/72.4
Fiscal deficit (2-1)	5,31,177	5,32,381	95.2/100.2
Note: Receipts do not include market borrowings as these are used to finance fiscal deficit
Source: Controller General of Accounts

Non-debt capital receipts were only about Rs 10,000 crore, just 13.8 per cent of the full year's target of about Rs 74,000 crore. The Coal India sale has not been factored in yet as it came in January and will be taken into account in February only. So far, the government has raised only 1,700 crore from five per cent disinvestment in SAIL.

Total revenues stood at Rs 7.04 lakh-crore. This is 55.7 per cent of the full-year BE of Rs 12.64 lakh-crore. The government had also realised 55.7 per cent of BE in 2013-14 at this point of time. 

Expenditure has been bit compressed than last year's. It stood at Rs 12.36 lakh crore, representing 68.9 per cent of BE of Rs 17.94 lakh crore. The difference, between expenditure and revenues is the resultant fiscal deficit. Expenditure was 69.9 per cent of BE in the first nine months of the previous year.

Non-plan spending was Rs 8.84 lakh crore, about 72.4 per cent of the full-year target of Rs 12.2 lakh crore, compared with 73.2 per cent for the first nine months last year. Softening of global crude oil prices and resultant impact on subsidies helped cap spending.

Plan spending for April-December was Rs 3.52 lakh crore, about 61.3 per cent of the full-year target of Rs 5.75 lakh crore, compared with 63.3 per cent for April-December last year.

Jaitley's ministry has already instructed other central departments to effect a 10 per cent cut in non-plan spending, excluding interest payment, repayment of debt, capital spending for defence, salaries, pensions and grants to states. It is is likely there will be substantial cuts on plan spending as well, which will affect centrally-sponsored schemes.