The North Block of the Secretariat Building Which Houses the Ministry of Finance (Photographer: Prashanth Vishwanathan/Bloomberg)

India’s Fiscal Deficit Reaches 120% Of Revised Full-Year Target

The Indian government’s fiscal deficit continues to run above budgetary estimates.

The fiscal deficit for the April-February period stood at 120 percent of the revised estimate presented by the Finance Ministry in February, showed data released by the Controller General of Accounts on Wednesday. In the same period last year, the government had hit 113 percent of the budgetary estimate.

Fiscal deficit, the gap between the government’s revenue and expenditure, stood at Rs 7.16 lakh crore in the first eleven months of the current financial year, as against the revised estimate of Rs 5.95 lakh crore, showed the data. The revenue deficit stood at Rs 5.24 lakh crore, compared to the revised estimate of Rs 4.34 lakh crore.

The government’s finances came under pressure in 2017-18 partly due to the implementation of the Goods and Services Tax. The government will account for only 11 months of revenue under GST, Finance Minister Arun Jaitley said in February. Volatility in revenue combined with a front-loading of spending led the government to cross its budget target by November itself. While presenting the budget for 2018-19, the government raised both the fiscal and revenue deficit estimates for 2017-18.

The final accounts for 2017-18 will be available by the end of April.

India’s Fiscal Deficit Reaches 120% Of Revised Full-Year Target

As a percentage of GDP, the government had pegged the fiscal deficit for 2017-18 at 3.5 percent compared to the earlier targeted 3.2 percent. Based on today’s data, the fiscal deficit is running at 4.2 percent of GDP. That calculation is based on the nominal GDP estimates put out in the economic survey, which were also used in the budget calculations this year.

The government appears to still be be banking on some interim dividend from the RBI, said a bond market participant. They may also be expecting higher nominal GDP growth, which could help them meet the fiscal deficit target as a percentage of GDP, this person said while speaking on condition of anonymity.

Other Highlights Of CGA Release:

  • Net tax revenue stood at 81.6 percent of the revised target, compared to 81.3 percent in the same period last year.
  • Non tax revenue stood at 60.2 percent of the revised target, compared to 62.4 percent last year.
  • Revenue expenditure stood at 87.5 percent of the revised target, compared to 88.6 percent last year.
  • Capital expenditure stood at 108.9 percent of the revised target, compared to 76.9 percent last year.
In our view, the extent to which the non tax revenues can be shored up in March 2018 would crucially determine if the actual fiscal deficit for 2017-18 breaches the revised estimate of Rs. 5.9 lakh crore. Moreover, total expenditure needs to contract by 2 percent on a year-on-year basis in March 2018, to avoid exceeding the level included in the revised estimated for FY18.
Aditi Nayar, Principal Economist, ICRA