Terming the FY14 fiscal deficit target of 4.8% of GDP as a red line, the government has asserted that it would not be breached under any circumstances.
Official data on Monday showed April-November revenue receipts stood at the same level as the year-ago period in relation to the respective budget targets at 47.6%. As for expenditure, 61.3% of the amount budgeted for FY14 was spent by November, about 4 percentage points higher than the corresponding figure for the year-ago period.
Between October and March last year, the Centre forced a R1-lakh-crore contraction in expenditure to rein in the FY13 fiscal deficit to a creditable 4.9% of the GDP.
This was against a 6.4% many had predicted even by the middle of that year. Budget FY14 estimated nominal GDP growth at 13.4% and, based on that, projected a total expenditure of Rs 16.65 lakh crore and revenue of Rs 10.56 lakh crore, aided by a strong growth in net tax receipts to Rs 8.84 lakh crore.
According to the latest Controller General Accounts (CGA) data, the Centre's net tax revenue stood at Rs 3.96 lakh crore in April-November, which is 44.8% of the full-year target of Rs 8.84 lakh crore. While this was worse than last year, non-tax revenue receipts in the period stood at 61.8% of the FY14 budget target at Rs 1.07 lakh crore, helped by higher PSU dividends and receipts of user charges and licence fees from telecom companies. The dismal PSU disinvestment scenario has kept non-debt capital receipts in April-November at just Rs 8,947crore (13.5%), against the full-year target of Rs 66,468 crore.
To give a fillip to the economy, expenditure was significantly front-loaded this fiscal (which explains both Plan and non-Plan expenditure in April-November being much higher than last year in relation to the Budget targets at 52.4% and 65.8%, respectively) . Revenue shortfall could be as high as Rs 90,000 crore (Rs 70,000 crore in tax receipts and Rs 20,000 crore in disinvestment). So the finance ministry will have no option but to be extremely stingy when it comes to releasing funds in the final months of the year, which could also hit some of the UPA government's flagship schemes in an election year. The ministry needs to aim for savings of Rs 1.3 lakh crore (about 25%) on Plan expenditure and Rs 25,000-27,000 crore (22%) on non-Plan capital expenditure. It would also likely roll over subsidy payments of Rs 1.1-1.2 lakh crore.
While data from the CGA captured tax receipts only up to November, the finance ministry has stated that net direct tax receipts up to December 20 this financial year, including advance tax payments, rose 13.7% from a year ago to Rs 4.12 lakh crore. Net corporate tax receipts up to December 20 grew 10.2% to Rs 2.6 lakh crore from last year, while net personal income tax receipts grew 20.5% to Rs 1.4 lakh crore in the period.
To meet its budgeted revenue target for FY14, the government needs to ensure that more than 57% of its budgeted gross tax revenue of Rs 12.36 lakh crore comes in the last five months of the year (November-March). This is an uphill if not impossible task as the economic downturn has had a considerable adverse effect on the growth in tax collections.
The telecom spectrum charges (from re-auction of 2G spectrum) estimated to be raked in by March is Rs 40,000 crore but the option of deferred payment given to telcos could be a dampener.