Last-Month Scramble Helps Government Close In On FY19 Fiscal Deficit Target
The Indian government managed to come close to its once-revised fiscal deficit target for financial year 2018-19, showed data released by the Controller General of Accounts.
Fiscal deficit for FY19 settled at close to 3.4 percent of GDP, in line with the revised target and marginally higher than the initial budget target of 3.3 percent of GDP. At the end of March, the fiscal deficit stood at Rs 6.45 lakh crore or 101.7 percent of the revised estimate.
The interim budget presented in February had pegged the FY20 fiscal deficit at 3.4 percent of the GDP. The final budget for the year, to be presented by the newly elected government, is awaited.
Government Accounts: February vs March
Meeting the fiscal deficit target was a last minute scramble.
The gap between the government’s revenue and expenditure stood at Rs 8.51 lakh crore at the end of February, which was 134.2 percent of the budget target. As of February, the government had met 74 percent of its tax revenue target and 70 percent of its non-tax revenue estimate for the year.
At the end of March, tax revenues stood at 88.7 percent of target, while non-tax revenues were at 100.4 percent. In April, BloombergQuint reported that the government is likely to miss its direct tax collection targets, apart from recording weaker than expected growth in collections from the Goods and Services Tax. The jump in non-tax revenue collections may have come from interim dividends, including a Rs 28,000 crore dividend from the Reserve Bank of India.
On the expenditure side, the government’s capital expenditure stood at 95.9 percent of budget target at the end of March 2019, compared to 86 percent in February. Revenue expenditure settled at 93.8 percent of target compared to 89 percent as on February-end.
The lower than expected revenue expenditure is partly due to subsidy payments, which were at only 74 percent of the budget estimate. That suggests that subsidy payments may have been deferred.
Fiscal management under the first tenure of the Narendra Modi government has been characterised by greater volatility in the past.
An earlier analysis by BloombergQuint showed that the fiscal deficit, as a percentage of the budget target, has been relatively high in the last few months of the financial year. To bridge the gap, the government has pushed last minute disinvestments and sought interim dividends from public sector enterprises and institutions like the Reserve Bank of India.
In FY19, for instance, the RBI transferred a Rs 28,000 crore interim dividend to the government to help it meet its revised fiscal deficit target. Disclosures to stock exchanges show that public sector enterprises like Coal India, Indian Oil Corporation and ONGC also paid out second interim dividends to the government.
Some part of the volatility has emerged from the introduction of GST. However, the government’s decision to front-load expenditure has also played a role, according to economists.