New Delhi: The risk of the government breaching its fiscal deficit target of 3.2% of gross domestic product (GDP) in the fiscal year ending March 2018 increased significantly as it exhausted 112% of its Rs5.5 trillion full-year fiscal deficit by November-end due to lower-than-expected revenue collections and higher revenue expenditure.
Data released by the Controller General of Accounts showed that during the April-November period, revenue deficit stood at 152% of the Rs3.2 trillion full-year target, signalling that the government may also miss the revenue deficit target of 1.9% of GDP for 2017-18.
During the same period last year, revenue deficit was 98.2% of the full-year target.
The finance ministry on Wednesday announced that it will borrow Rs50,000 crore in long-term funds through government securities, which analysts said may raise the fiscal deficit by 30 basis points to 3.5% of GDP for 2017-18.
A basis point is one-hundredth of a percentage point.
This may also force finance minister Arun Jaitley to recalibrate his fiscal consolidation road map of achieving a fiscal deficit of 3% of GDP by 2018-19.
The finance ministry, however, said in a statement on Wednesday that the government will not be raising any net additional borrowing “between now and March 2018" as it plans to trim its short-term borrowing programme.
The Congress in a tweet said: “The government’s miscalculations and reckless policies have widened the fiscal deficit well beyond acceptable norms."
Jaitley has sought additional funds from Parliament to meet increasing expenditure through supplementary demands for grants which will lead to a net cash outgo of Rs44,000 crore.
Goods and services tax (GST) receipts have been a cause for concern. Total GST collections, including taxes on inter-state supplies and the cess on certain items, added up to Rs80,808 crore in December. This was a 14% drop from receipts in August, the first month of tax collection and return filing under the new indirect tax system that kicked in on 1 July. However, tax revenue collections are only marginally down in the April-November period at 57% of the full-year target from 58.9% during the same period a year ago.
The government has so far managed to raise about Rs54,000 crore of the targeted Rs72,000 crore through disinvestment, according to information available from the finance ministry.
Non-tax revenue, including dividends from public sector banks and the Reserve Bank of India (RBI), is only 36.5% of the full-year target in the April-November period against 54.2% during the same period last year. RBI has transferred Rs30,659 crore as a dividend to the government, less than half the surplus it transferred the previous year, causing much of the drop in non-tax revenue.
The finance ministry has started the budget-making exercise for the fiscal year starting 1 April with the release of the budget circular containing the timelines for submission of information by various departments. The budget is expected to be presented on 1 February like last year.
Jaitley has indicated that the big focus of next year’s Union budget will be spending on infrastructure and the rural sector. While spending on infrastructure would help revive investment, the extra focus on the rural sector will help alleviate prolonged rural distress—a politically sensitive subject. Since the 17th general election is scheduled for 2019, the Union budget for 2018-19 will effectively be the last one to be presented by the Bharatiya Janata Party-led National Democratic Alliance government in its current term in office.