The Union government's total public debt (excluding liabilities under the public account) rose to Rs 43.21 lakh crore at the end of June 2013. Compared to Rs 41.12 lakh crore just three months ago (end-March 2013), this was an increase of around five per cent in a quarter. The Quarterly Report on Public Debt Management that the Union finance ministry released last week mentions these figures without showing any apparent signs of concern.
That nonchalance was also evident in the report's statement that the government's outstanding internal debt, Rs 39.2 lakh crore at the end of June 2013, went up by 4.5 per cent over the previous quarter, but declined, though marginally, to 37.1 per cent of gross domestic product (GDP). Note that this estimate is based on the finance ministry's assessment that the GDP growth rate in the first quarter of 2013-14 would be at least the same as 4.8 per cent, achieved in the last quarter of 2012-13.
Also note that public debt figures do not capture the entire component of non-government external debt, which is much larger than the external debt incurred directly under government account. For instance, total external debt stood at Rs 21.2 lakh crore at the end of March 2013, of which the debt under government account was estimated at Rs 3.64 lakh crore. The figure for the total external debt at the end of June 2013 has not yet been released, but an indication is available from the fact that the government's external debt by end-June 2013 went up by 10 per cent to Rs 4.01 lakh crore. Even the trend of investment made by foreign institutional investors (FIIs) in government securities and treasury bills shows a clear northward movement. Investments by FIIs in such instruments were estimated at Rs 57,800 crore in June 2012. A year later, they have increased to Rs 72,600 crore.
A more interesting insight the finance ministry's Quarterly Report on Public Debt Management offers is in the area of government revenues and spending during the first quarter of the current fiscal year. And while analysing these numbers, the report is fairly candid in bringing out the sharp deviations from what the 2013-14 Budget had planned at the start of the current fiscal year. For instance, against a 19 per cent growth rate budgeted for gross tax collections, the report shows that the actual amount mobilised in the first quarter rose by only 4.2 per cent.
The shortfall is showing in almost all the major tax heads. In corporation tax, first-quarter growth is only 2.7 per cent, compared to the target of 17 per cent. Customs duty has shown growth of less than five per cent (helped, of course, by the rupee depreciation), but the Budget's growth target for this category was more than 13 per cent. More alarming is the 18 per cent fall in excise duty collections- the growth target was 15 per cent. It is difficult to understand the basis on which the government expects the GDP growth rate to remain at the same level seen in January-March 2013. Service tax collections, at 16 per cent, have shown robust growth, but are way short of the targeted growth rate of 36 per cent. Personal income tax collections seem to have recorded decent growth of more than 15 per cent, compared to the growth target of 20 per cent.
On the expenditure side, too, the government's performance in the first quarter of the current year has been poor. Total expenditure between April and June 2013 was 23 per cent of the budgeted outlay for the full year. In the same period last year, expenditure accounted for 21 per cent of the annual estimate. With tax collections faring poorly, the government's deficit numbers have taken a hit. Its revenue deficit for the first quarter was more than 55 per cent of the Budget estimate for the full year. And its fiscal deficit was more than 48 per cent of the target. Compare these numbers with the situation that prevailed in the first quarter of last year, and you would know the extent of the problem. In the first quarter of 2012-13, the revenue and fiscal deficits were much lower, at 43.6 per cent and 37 per cent, respectively, of that year's Budget estimates.
Two obvious questions arise out of these numbers. The government's finances in the first quarter of this year seem to be worse than what they were in the first quarter of last year. P Chidambaram took charge of the finance ministry in August 2012 and reined in the fiscal deficit. At the end of the year, he managed to bring the fiscal deficit down to 4.9 per cent, lower than the Budget estimate of 5.1 per cent of GDP. The first-quarter performance in the current year is much worse. Can the finance minister repeat his expenditure-tightening act this year and will he enjoy the same flexibility in today's political environment?
Secondly, the government is rightly worried about the large current account deficit and trying all kinds of measures to control it. In that process, has it ignored the equally important challenge of reining in the fiscal deficit, which is clearly threatening to exceed the 2013-14 Budget target of 4.8 per cent of GDP?
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