Apr-Sep fiscal deficit nears 83% of full-year target
In the Apr-Sep period, India's fiscal deficit was Rs4.38 trillion against a full year estimate of Rs5.31 trillion
New Delhi: India’s fiscal deficit reached 82.6% of the budget estimate in the first half of the fiscal year itself—an indication of the challenge the Narendra Modi-led National Democratic Alliance (NDA) government faces to stay within the target.
In the April-September period, India’s fiscal deficit was ₹ 4.38 trillion against a full year estimate of ₹ 5.31 trillion, according to data released by the controller general of accounts.
In the corresponding year-ago period, the fiscal deficit had reached 76% of the budget estimate.
In the six months ended 30 September, while total expenditure reached 48% of the budget estimates, revenue receipts lagged 35%, mainly due to slowing tax collections. Weak manufacturing activity has led to a contraction in excise duty collections. In addition, corporate tax collections have not kept pace with projections because corporate profits have fallen short.
Finance minister Arun Jaitley said the high tax refunds in the current fiscal were exerting pressure on fiscal deficit numbers. “Higher tax refunds are getting reflected in fiscal deficit number. This year there were pending tax refunds estimated at around ₹ 1.20 lakh crore," he said.
As of 20 October, while gross direct tax collections grew 13.6% to ₹ 3.77 trillion, refunds of ₹ 80,850 crore ensured that net collections were at ₹ 2.96 trillion.
The government aims to limit the fiscal deficit to 4.1% of gross domestic product in 2014-15 and is banking on a revival in economic growth in the second half of the fiscal year to boost tax collections.
“It would be challenging to achieve indirect tax aim. Direct tax target would be achievable. We would strive to achieve fiscal deficit aim for this fiscal," Jaitley said.
The government is also counting on lower international crude oil prices and its recent decision to deregulate diesel prices to reduce its subsidy bill, which is budgeted to be more than ₹ 2.6 trillion in the current fiscal. Crude prices are hovering at around $85 a barrel internationally, much lower than the $110 a barrel projection that India had used while arriving at its budget math in July.
Mindful of the increasing gap between expenditure and revenue, the finance ministry on Thursday announced a slew of austerity measures including a 10% cut in non-plan expenditure as the government tries to stay within the budgeted target. It has put in place curbs on foreign travel, banned hosting conferences in 5-star hotels and creation of new posts. It has also placed utilization limits on non-plan funds in the last quarter of the fiscal year. In the first six months of the fiscal year, non-plan expenditure was at 50.5% of the budgeted projection.
Aditi Nayar, senior economist at rating agency Icra Ltd, said in a note that with tax revenue growth underperforming the budgeted target in the first half of the fiscal year, revenue buoyancy will depend upon the success of the telecom auction and asset sales in the remainder of this fiscal year.
As per CGA data, while tax revenues were at 33% of its full year targets, non-tax revenues grew marginally better to 44.6% of budgeted targets.
“In addition to the recently announced fiscal prudence measures, savings related to the budgetary allocation for food subsidy (following the extension in the deadline for State Governments to identify eligible households under the National Food Security Act to April 1, 2015) and fuel subsidies (related to the expected moderation in under-recoveries with the fall in crude oil prices and deregulation of diesel prices) would ease the pressure on non-plan revenue expenditure in H2FY15," Nayar said.
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