People walk through the North Block of Central Secretariat building in Delhi, which houses the Ministries of Finance and Home Affairs (Prashanth Vishwanathan/Bloomberg News)

Fiscal Deficit Reaches 114.8% Of Full-Year Target In November

India’s fiscal deficit continued to widen further in November after breaching the budgeted target for financial year 2018-19 last month.

Fiscal deficit—the gap between the government’s revenue and expenditure—stood at Rs 7.16 lakh crore at the end of November, according to data released by the Controller General of Accounts. That’s 114.8 percent of the budgeted estimate of Rs 6.24 lakh crore for 2018-19.

The gap had stood at 112 percent in November last year. To be sure, if revenue collections pick up in the remainder of the year, the government may still meet its target. If not, the government may be under pressure to prune expenditure.

The data will raise questions on the government’s ability to meet its fiscal deficit target for the second year running. Last year, the government had initially targeted a fiscal deficit of 3.2 percent of GDP but later revised it to 3.5 percent of GDP.

While Finance Minister Arun Jaitley has repeatedly assured that the government is on track to meet its fiscal target for the current year, economists see a rising probability of a higher than expected fiscal deficit this year.

Total expenditure for the April-November period rose to Rs 16.1 lakh crore, or 66.1 percent of the full-year target. This is already lower than the 68.9 percent of budget target completed in the April-November 2017 period. Capital expenditure reached 63.8 percent of the 2018-19 target, compared with 59.5 percent in the same period last year.

Revenue deficit stood at 132.4 percent of the target compared with 152.2 percent in the same period last year.

Revenue receipts stood at 50.4 percent of the target compared with 53.1 percent in the same period last year. Tax revenue was at Rs 7.3 lakh crore, or 49.4 percent of the full-year target. In the same period last year, tax revenue had hit 57 percent of the budget target. One reason for this may be the continued weakness in GST collections compared with expectations, though they surpassed the Rs 1 lakh crore-mark in September before falling below that mark in October.

Non-tax revenue touched 56.6 percent of the target compared with 36.5 percent 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 are its budgetary estimates:

  • 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 for the financial year 2018-19.