Amid slowing tax revenues and rising Plan expenditure, the Centre’sfiscal deficit for the first four months of this financial year soared to Rs 3.4 lakh crore, 62.8 per cent of the Budget estimate (BE) of Rs 5.42 lakh crore for 2013-14, according to data released by the Controller General of Accounts.
In the corresponding period last year, the deficit was 51.5 per cent of the BE for 2012-13. However, in 2012-13, the government was able to rein in the deficit at 4.8 per cent of gross domestic product (GDP), against the BE of 5.1 per cent, owing to a massive cut in Plan expenditure.
Earlier, Finance Minister P Chidambaram had said the target of reining in fiscal deficit at 4.8 per cent of GDP this financial year was a red line that wouldn’t be breached. Friday’s data showed he had a difficult task at hand. In the April-July period this year, it was particularly Plan expenditure that increased the fiscal deficit — it stood at Rs 1.49 lakh crore, 27 per cent of the BE of Rs 5.55 lakh crore. In the corresponding period last year, it stood at 21.9 per cent of the BE.
Non-Plan expenditure accounted for 33.5 per cent of BE, at Rs 3.71 lakh crore. In the year-ago period, it accounted for 33.3 per cent of BE.
On the revenue side, taxes yielded just 16.4 per cent of the BE in the first four months of 2013-14, at Rs 1.45 lakh crore. In the year-ago period, this percentage stood at 18.5 per cent. Analysts blamed this on slowing economic growth.
Tax receipts are expected to see an impact of the slowdown in growth. The Centre’s non-debt capital receipts yielded just 6.6 per cent of BE, against 9.7 per cent in the year-ago period. The government collected Rs 4,401 crore of such receipts, against Rs 66,468 crore pegged in the BE. Of this, disinvestment yielded only Rs 93.9.34 crore, against Rs 40,000 crore estimated in Budget 2013-14.
Given real GDP growth is not expected to exceed six per cent this financial year and Wholesale Price Index-based inflation might remain at about six per cent, nominal economic growth might not exceed 12 per cent. In the Budget, this growth was estimated at 13.5 per cent, against the previous year. With low growth, in absolute terms, any fiscal deficit would seem large, as percentage of GDP.
Revenue deficit or the gap between current expenditure (which doesn’t add to asset creation) and current receipts, touched 73 per cent of BE in the April-July period, against 61.3 per cent in the corresponding period last year.