Thanks to an acceleration in capital spending and rise in revenue expenditure caused by release of subsidy arrears, the Centre’s fiscal deficit in the first four months of the fiscal stood at 69.3% of the FY16 target, compared with 61.2% of the corresponding target in the year-ago period. The fiscal deficit in April-July was Rs 3.85 lakh crore, while the deficit estimated in the Budget for the full year is Rs 5.56 lakh crore.
Revenues have also picked during the period, albeit at a slower pace than expenditure. Revenue receipts during April-July were Rs 2.09 lakh crore, or 18.3% of the full fiscal target of Rs 11.41 lakh crore, thanks to proceeds from auction of spectrum rather than tax revenue that rose only marginally when compared with the situation a year ago.
Higher transfers to states was also a reason for the low growth in net tax revenue. For the same period last year, revenue receipts were 14.8% of the full-year target.
The April-July net tax collection was Rs 1.54 lakh crore, which is 16.7% of the estimate for the full year; in the corresponding period a year ago, the net tax revenue stood at 15% of that year’s target.
Total expenditure in April-July was 33.8% of the Budget estimate (BE) for the full year, according to data compiled by the Controller General of Accounts. Total expenditure in the same period last year was 28.1% of the BE for the year.
Total spending, which is set at Rs 17.77 lakh crore for FY16, may go up by Rs 25,500 crore after the government got Parliament’s approval in July to spend more on recapitalisation of public sector banks, among others.
While rise in fiscal deficit in the first four months could create concerns on achieving the target of 3.9% of GDP in FY16, analysts say fall in crude prices and higher indirect tax collections due to increases in tax rates in the latest budget and the likely pick-up in economy in the coming months could create fiscal space to spend more on the capital side.
In April-July, Plan capital spending stood at Rs 51,631 crore or 38.2% of the BE for the year as compared to Rs 28,046 crore or 23.1% of the full-year estimate during the same period last year.
Increase in Plan capital spending at a faster pace is a positive for the economy as it is seen crucial in the current year to boost economic activity as a pick-up in private-sector investment may be weak. Capital spending was 23% of the BE in April-June of FY16 and the corresponding figure was 18.6% in FY15.
In April-July, Plan expenditure stood at Rs 1.58 lakh crore or 33.9% of the full year aim, which is a substantial improvement compared to Rs 1.32 lakh crore (23%) in the year-ago period.
With release of subsidies in higher quantum for fertilisers and food, non-Plan spending during the first four months of FY16 rose to about Rs 4.43 lakh crore, or 33.8% of the full year target, from Rs 3.72 lakh crore or 30.5% of the BE of FY15.