Rising revenue gap worries govt

Revenue deficit at Rs 46,394 crore

The government today expressed concern over the higher revenue deficit in the first quarter of the current fiscal, but said revenue realisation could improve in the second. The optimism was based on the positive outlook for the industrial sector and modest growth in agriculture.

The government's quarterly economic review, tabled in Parliament today, said, "The position of the revenue deficit in the first quarter of 2004-05 in relation to the Budget appears to be a cause for concern."

The deficit has increased to Rs 46,394 crore in April-June this year from Rs 40,031 crore in the corresponding period last year. The deficit is 61 per cent of the Budget target. 

First quarter accounts
	Budget Estimate '04-05  (Rs cr)	Actuals till June '04 (Rs cr)	Percentage  of BE till June '04	5-yr moving avg for Q1
Revenue receipts	3,09,322	30,631	9.9	11.9
Net tax revenue	2,33,906	24,306	10.4	12.9
Non-tax revenue	75,416	6,325	8.4	9.5
Capital receipts	1,68,507	59,060	35.0	28.0
Recovery of loans	27,100	17,261	63.7	23.5
Other receipts	4,000	118	3.0	6.2
Borrowings and other liabilities	1,37,407	41,681	30.3	31.0
Total receipts	4,77,829	89,691	18.8	18.2
Non-Plan receipts	3,32,239	66,656	20.1	18.2
On revenue account	2,93,650	60,982	20.8	18.3
Interest payments	1,29,500	24,684	19.1	17.0
On capital account	38,589	5,674	14.7	18.4
Plan expenditure	1,45,590	23,035	15.8	18.0
On revenue account	91,843	16,043	17.5	18.5
On capital account	53,747	6,992	13.0	17.2
Total expenditure	4,77,829	89,691	18.8	18.2
Revenue expenditure	3,85,493	77,025	20.0	18.3
Capital expenditure	92,336	12,666	13.7	17.7
Revenue deficit	76,171	46,394	60.9	36.0
Fiscal deficit	1,37,407	41,681	30.3	31.0
Primary deficit	7,907	16,997	215.0	134.6

The review, however, said robust industrial growth observed in the first quarter of the fiscal indicates a positive outlook for growth. This coupled with domestic demand and exports could augur well for a healthy revenue performance to contain the revenue deficit within the targeted level.

The review noted that recent developments, including the setting up of two special taskforces to expedite collection of direct and indirect tax arrears, the intra-year fiscal performance targets prescribed under the Fiscal Responsibility and Budget Management rules and the new tax proposals, especially on service tax, would have a salutary effect on improving revenue collections. The impact of these measures would be visible only in the second half of the fiscal.

The review attributed the increase in revenue deficit to an increase in revenue expenditure on interest payments, pensions, police and elections and Plan grants to states. It further noted that the gap between the first quarter tax collection and the Budget Estimates were particularly significant in case of direct taxes.

The government managed to collect Rs 3,950 crore in corporation tax, which is 4 per cent of the Budget Estimate. Income tax collections were estimated at Rs 10,482 crore up to June, which was 21 per cent of the Budget Estimates. The government has projected a 26 per cent growth in direct tax collections at Rs 1,39,000 crore.

The review said a modest growth in the agricultural sector was also likely to be achieved in the current fiscal due to the recovery of the monsoon.