Quality of government fiscal deficit deteriorates

The Indian economy, however, has received a substantial boost thanks to the higher deficit


Capital expenditure went down slightly over April-August 2016, compared with the same period a year ago. Photo: Pradeep Gaur/Mint
Capital expenditure went down slightly over April-August 2016, compared with the same period a year ago. Photo: Pradeep Gaur/Mint

The quality of the central government’s expenditure has deteriorated significantly.

This was only to be expected, given the increase in revenue expenditure on account of the hike in government salaries.

Capital expenditure went down slightly over April-August 2016, compared with the same period a year ago.

In sharp contrast, as the chart shows, the government’s revenue expenditure went up sharply compared to the year-ago period.

The upshot has been a substantial rise in the revenue deficit.

The economy, however, has received a substantial boost thanks to the higher deficit.

Ratio of forex reserves to external debt hits a high

India’s foreign exchange reserves-to-external debt ratio rose to a 3.5-year high of 75.2% by end-June 2016, Religare Institutional Research said in a note to clients.

The country’s external debt fell slightly to $479.7 billion in the quarter ended June, on the back of a consistent decline in commercial borrowings.

However, according to Religare, since the Reserve Bank of India (RBI) added nearly $80-90 billion to forex reserves over the last three years, India’s external position remains benign versus other emerging market peers.

The upshot: India has sufficient forex reserves to weather external shocks.

US cuts anti-dumping duty on shrimps from India

The US department of commerce’s decision to roll back the hike in anti-dumping duty on import of frozen shrimps from India is likely to benefit farmers and would be revenue-neutral for processors, rating agency Icra Ltd said.

In its final review in September, the commerce department fixed the final average duty at 2.2%.

The US, which consumed 123,114 tonnes of frozen Indian shrimps in fiscal year 2016, remains the largest export market for the seafood from India.

In value terms, it is about Rs7,435 crore. In FY16, overall, shrimp exports from India rose nearly 4% from a year earlier to 363,653 tonnes.

However, in value terms, it declined around 12% to Rs19,493 crore from a year ago.

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