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Fiscal deficit already at 61.2% of full-year target

The Centre’s fiscal deficit touched 61.2 per cent of the full-year Budget Estimate (BE) in April-July, only a notch lower than the 62.8 per cent in the same period last year.

The deficit constituted 10.5 per cent of gross domestic product (GDP) in the first quarter (April-June) of the current financial year, slightly higher than 10.3 per cent in the corresponding period last year.

The government has pegged its fiscal deficit, the gap between its expenditure and receipts, at Rs 5.31 lakh crore or 4.1 per cent of GDP this year. According to the data issued on Friday by the Controller General of Accounts (CGA), it touched Rs 3.24 lakh crore in April-July, the first four months of 2014-15.

If the government spends more than Rs 2.06 lakh crore in the remaining eight months of the financial year, the deficit will swell, forcing it to borrow more from the market to finance this. This might crowd out private investment and put pressure on interest rates and inflation.

“What matters is how quickly the government divests its stake (in state sector units) and the economic conditions turn favourable,” said D K Joshi, chief economist with ratings agency CRISIL, which predicted a fiscal deficit at 4.5 per cent of GDP this year.

Finance Secretary Arvind Mayaram has often noted that monthly fiscal deficit data doesn’t give a clear picture. In a particular month the government might spend more; in other months, revenue collections might be more because of advance tax payments or other non-tax revenue. Also, past trends show the fiscal deficit is always high in the beginning of the year.

“Though concerns are being raised on the data that has been released on the government’s revenue and expenditure, it is pertinent to mention that revenues are mostly back-ended, whereas expenditure is evenly placed,” he said recently. Adding with revenue picking up in the remaining months of the year, the fiscal deficit target of 4.1 per cent would be met, despite being difficult.

The data issued by the CGA showed total expenditure during April-July at Rs 5.03 lakh crore or 28.1 per cent of the entire year’s estimate, against 31.3 per cent last year.

Plan expenditure in the four-month period this year was Rs 1.32 lakh crore or 23 per cent of the BE, compared with 27 per cent in the year-ago period. Non-Plan expenditure at Rs 3.71 lakh crore or 30.5 per cent of the BE was also lower from 33.5 per cent in April-July 2013-14. If expenditure was lower than last year, so were revenue receipts. Total receipts in April-July this year were Rs 1.79 lakh crore or 14.2 per cent of the full-year estimate, compared with 16.1 per cent in the corresponding period of the previous year. Of this, tax receipts were Rs 1.46 lakh crore, which is 15 per cent of the BE.

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