North Block which houses the Ministry of Finance. (Photographer: Prashanth Vishanathan/Bloomberg)

India’s Fiscal Deficit Reaches 68.7% Of FY19 Target

India’s fiscal deficit rose further in June inching closer to the government's budgetary estimate for financial year 2018-19. But it remained lower than what it was during the same period last year.

Fiscal deficit, the gap between the government's revenue and expenditure, rose to Rs 4.29 lakh crore at the end of June, according to data released by the Controller General of Accounts. That’s 68.7 percent of the targeted Rs 6.24 lakh crore in 2018-19.

The gap is lower than what it was in June last year, at 80.8 percent of the FY18 target, as the government had front loaded expenditure to kickstart the investment cycle. India's finances were constrained then as it had to revise its deficit target upwards due to the implementation of the Goods and Services tax. It aims to keep the deficit within 3.3 percent of the country’s gross domestic product for the current financial year.

“Although the government of India's fiscal deficit for the first quarter stood at a considerable 69 percent of the budget estimate for the full year, this marks a modest improvement relative to the situation in Q1FY18,” Aditi Nayar, principal economist at ICRA Ltd., said in a statement.

The fiscal deficit for the period recorded a mild year-on-year decline in absolute terms, with a robust 34 percent expansion in revenue receipts and 27 percent growth in capital expenditure, amid a moderate 7 percent rise in revenue spending.

Notwithstanding the mild improvement in the fiscal deficit in Q1FY19 year-on-year, various fiscal concerns persist, including whether the budgeted targets for GST revenues, dividends and profits and disinvestment would be realised, and whether the outlays required for revised minimum support price, National Health Protection Scheme, fuel and other subsidies, and bank recapitalisation would prove to be adequate.
Aditi Nayar, Principal Economist, ICRA

The government’s total expenditure for April-June rose to Rs 7.07 lakh crore, or 29 percent of the full-year target. Revenue receipts stood at 15.5 percent of the target at Rs 2.67 lakh crore.

Tax revenue was at Rs 2.37 lakh crore, or 16 percent of the full-year target. Non-tax revenue hit 12.5 percent of the target at Rs 30,601 crore. Capital expenditure reached 29 percent of the FY19 target, compared to 22.1 percent in the same period last year.

Government’s Fiscal Plan

Budget documents showed that the government is expecting a 16.7 percent rise in its gross tax revenue in FY19. Here’s what its budgetary estimates are:

  • The gross tax revenue is expected to increase to Rs 22.7 lakh crore.
  • As a percent of GDP, gross tax revenue is expected to be 12.1 percent.
  • The net tax revenue for the Centre is pegged at Rs 14.8 lakh crore.
  • Total expenditure for FY19 is pegged at Rs 24.4 lakh crore. That’s inclusive of the expenditure as a result of GST compensation to states.
  • Capital expenditure is estimated to increase to Rs 3 lakh crore in FY19.