The government’s fiscal stimulus was much lower in the July-September 2017 quarter than in the same period last year. Data from the Controller General of Accounts show that the fiscal deficit expanded by Rs57,253 crore during the September 2017 quarter, compared to Rs1,21,665 crore in the September 2016 quarter. Growth in the fiscal deficit in the second quarter of the current fiscal year has been less than half that in the same period last year.

That’s not all. Growth in the fiscal deficit during the September quarter was also far below its growth in the June 2017 quarter. Simply put, the central government’s push to GDP growth, which has been an important factor in the last few quarters, will be missing in the September 2017 quarter. It is this fact that must have sparked all the talk about providing an extra fiscal stimulus to growth.

Consider also the figures for central government expenditure. Total expenditure during the September 2017 quarter was Rs4,98,456 crore, less than the Rs5,15,896 crore notched up over the same period last year. The government’s capex too has been pruned. Capital expenditure during the September 2017 quarter was lower compared to the same period last year. As the chart shows, the year-on-year percentage contraction in total central government expenditure is the most since March 2014.

What are the prospects of the government providing fiscal support for growth in the second half of the year? It’s not much, if the government intends to stick to its fiscal deficit target. As at end September 2017, the fiscal deficit was 91.3% of the annual target. In contrast, at end-September 2016, the fiscal deficit was 83.9% of its target.

With fiscal support for GDP growth in the September 2017 quarter so low, the private sector will have to offset the lack of fiscal stimulus in the quarter to boost overall growth. The silver lining is that there is likely to be a re-stocking related bounce during the quarter.

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