BackFiscal deficit reaches nearly 88% of full-year target in December
While net tax revenue collections rose to 67.6% of the full-year target, non-tax revenue collections increased to 81.9% of the fiscal target
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New Delhi: India’s fiscal deficit in the first three quarters (April-December) of the fiscal year 2015-16 remained at 87.9% of the full-year target, signalling better fiscal management. During the same period last year, the government had exhausted its full-year target.
The finance ministry has a fiscal deficit target of 3.9% of gross domestic product (GDP) for 2015-16 and despite a lower nominal GDP print, finance minister Arun Jaitley has promised to achieve the target. However, the mid-year economic review by the ministry has suggested revising upward the fiscal deficit target of 3.5% of GDP set for next year to boost investment in infrastructure, given that investments by the private sector remain tepid.
During the period, while the government used 74.4% of its plan expenditure target, it spent 73.8% of its non-plan expenditure for the full year.
Both tax and non-tax revenue collections improved compared to the last fiscal. While net tax revenue collections rose to 67.6% of the full-year target, non-tax revenue collections increased to 81.9% of the fiscal target. During the previous fiscal year, tax and non-tax revenue collections stood at 55.8% and 69.7%, respectively.
Revenue deficit for the April-December period also remained within bounds at 81.7% of the full-year target against 106.2% in fiscal 2014-15.
Aditi Nayar, senior economist at ICRA Ltd, said both the revenue and fiscal deficits for the first three quarters of FY16 have printed considerably lower than the year-ago levels, which is encouraging. “Even as low disinvestment inflows relative to the budgeted level remain a risk, the probability of a slippage relative to the absolute fiscal deficit target of 5.6 trillion in 2015-16 appears muted," she added.
Nayar said the four rounds of hikes in excise duty on petrol and diesel since November 2015 would boost indirect taxes by around 120 billion in the last quarter of this fiscal. “This holds positive implications for the Union as well as the state governments, with central tax devolution to the latter likely to be in line with the level budgeted for 2015-16, in contrast to the trend of shortfalls recorded in the previous four years," she added.
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