Home / Politics / Policy /  Fiscal deficit hits 99% of full-year target in November

India’s fiscal deficit reached 99% of its budget estimate in the first eight months of the fiscal year, an indication that the government will have to tighten its belt in the last quarter of 2014-15 if it wants to stay within its budget estimates.

In the April-November period, fiscal deficit was at 5.25 trillion. The government aims to contain its fiscal deficit at 5.31 trillion, or 4.1% of gross domestic product, in the current fiscal year.

The higher fiscal deficit numbers were mainly on account of a slippage in revenue collections, especially tax revenue. While total revenue receipts was at 45.5% of budget estimates, total expenditure was at 60% of the budgeted amount.

In the April-November period, tax revenue collection was at 4.13 trillion, or 42.3% of the budget estimate, according to data released by the controller general of accounts. While plan expenditure was at 51% of budget estimates, non-plan expenditure was at 64% of the budgeted amount.

The government is hoping for a pick-up in tax collections in the last quarter of the financial year as well as revenues from selling stakes in state-run enterprises.

Aditi Nayar, senior economist at rating agency Icra, said in a note that though higher excise levied on petrol and diesel would provide some buoyancy in tax revenues in the remainder of this fiscal, substantial shortfalls in tax collections relative to the budget estimate for 2014-15 are inevitable.

“Notwithstanding the respite provided by lower under recoveries on sale of fuels and fiscal prudence measures, some expenditure prioritization would be required to offset the shortfall in revenues. Achieving the target of restricting the fiscal deficit to 4.1% of GDP will also hinge on the extent of inflows garnered through disinvestment," said Nayar.

The government has announced expenditure rationalization measures including curbs on travel as well as a 10% cut in non-Plan expenditure to control its spending.

Separate data released by the finance ministry showed India’s external debt rose to $455.9 billion as of end September, an increase of 3% from the level at end-March 2014.

The rise in external debt during the period was mainly due to long-term external debt, particularly commercial borrowings and deposits by non-resident Indians (NRIs), the government said in a statement.

While long-term debt increased to $369.5 billion at end-September 2014, rising 4.7% from March, short-term debt declined by 3.2% to $86.4 billion. Long-term debt constituted 81% of India’s external debt.

Currency-wise, the share of US dollar-denominated debt continued to be the highest in external debt at 60.1%, followed by the Indian rupee (24.2%), special drawing rights or SDR (6.5%), Japanese yen (4.5%), and euro (3%).

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