India’s Fiscal Gap Narrows In September

India’s fiscal deficit narrowed to 91.3 percent of the budgetary target for fiscal 2017-18 even as concerns around overshooting continued to linger.

Fiscal deficit, the gap between the government’s earnings and spending, stood at Rs 4.99 lakh crore in April-September, compared to the target of Rs 5.47 lakh crore for FY18, according to data released by the Controller General of Accounts. The deficit has improved from August, when it had reached 96.2 percent on the full year target at Rs 5.25 lakh crore.

The revenue deficit too narrowed to 118 percent of the full year target, at Rs 3.79 lakh crore in April-September.

India is facing its worst economic slowdown in three years at a time when it is also trying to bring down its fiscal deficit to 3 percent of the GDP by 2019. Reviving the economy remains a challenge as private investments are subdued and government finances constrained.

Earlier in October, the Indian government unveiled a Rs 2.11 lakh crore recapitalisation package for state-owned banks which'd enable them to lend freely again. The package will probably not nudge India's fiscal deficit off its glide-down path as a bulk of that capital will be raised by issuing bonds, economists and policymakers said. The rest would come from market borrowings and budgetary support over two years.

“If they’re recapitalising by bond issuances, that doesn’t add to the fiscal deficit other than the interest payable on the bonds, which anyway will not happen this year,” Saugata Bhattacharya, chief economist at Axis Bank, had told BloombergQuint earlier. The plan will however add to the country’s debt instead, which the credit rating agencies will keep in mind, he added.

Also Read: Will The Mega Bank Recapitalisation Nudge India Off The Fiscal Track?

Other Highlights

• Capital expenditure in the April-September period was lower than in the corresponding year. The government’s capex stood at Rs 1.46 lakh crore, around 47.3 percent of the budgeted target. This figure was 54.7 percent in the same period last year.
• Revenue expenditure stood at Rs 10 lakh crore, nearly 55 percent of the full year target. This too was higher than 51.6 percent in the corresponding period last year.
• Revenue from tax receipts reached 44.2 percent of the budgeted estimate at Rs 5.4 lakh crore. Non tax revenue stood at 0.8 lakh crore or 28 percent of the target.