According to the statement tabled by finance minister P Chidambaram in Parliament on Thursday, revenue deficit in the first quarter has gone up to Rs 46,494 crore (61 per cent of the budget target for 2004-05) from Rs 40,031 crore (36 per cent) in the corresponding period last year.
The quarterly statement was tabled in pursuance of the Fiscal Responsibility and Budget Management (FRBM) Act.
In the budget for 2003-04, the revenue deficit was targeted at Rs 1,12,292 crore (4.1 per cent of the GDP) whereas in the current financial year, the government has set a stiffer target, limiting it to 2.5 per cent of the GDP. This implies substantial reduction in revenue deficit even in absolute terms (Rs 76,171 crore).
The deterioration in revenue deficit has been attributed to increase in revenue expenditure, notably interest payments (on account of less than estimated income from premium on re-issue of government securities), pension (due to enhancement of pensionary benefits), police, general elections and grants to states (for accelerating Plan expenditure in agriculture, education and rural development).
Non-Plan expenditure in the first quarter amounted to Rs 66,656 crore which worked out to 20 per cent of the budget estimates. In the corresponding period last year, the non-Plan expenditure in the first quarter amounted to 18 per cent of the budget estimates.
On the receipts side, the statement says that the gap between actual collection in the first quarter and budget estimates is quite marked in case of direct taxes. The proposals in the budget presented on July 8, which include imposition of education cess and other resource mobilisation initiatives like recovery of tax arrears, will help the government in increasing collection.
Corporation tax collection during the first quarter at Rs 3,950 crore was 4 per cent of the total target for the year compared to 6 per cent realised during the corresponding period last year. However, in case of income tax, realisation at Rs 10,483 crore was 21 per cent of the target compared to 14 per cent realised in the corresponding period last year. In case of customs, the collection at Rs 10,672 crore amounted to 20 per cent of the budget estimates.
The realisation during the corresponding period last year was 23 per cent of the target.
As far as excise duties were concerned, collection in the first quarter at Rs 13,711 crore worked out to 13 per cent of the budget estimates. The realisation was 13 per cent of the target in the first quarter of 2003-04. The net tax realisation in the first quarter at Rs 24,306 crore was 10 per cent of the budget estimates. Last year also the governemnt collected 10 per cent of the estimated revenue in the first quarter.
The finance ministry is hopeful of making up the lost ground in the second half of the current fiscal. According to the statement, revenue from education cess in respect of direct taxes and service tax, and from new tax proposal especially of service tax and securities transaction tax, will start flowing after the Finance Bill is passed. (The Finance Bill was passed by Parliament on Thursday.)
The quarterly review adds that the two special task forces for expediting collection of arrears of direct and indirect tax revenue have started functioning and salutary effect of these developments on revenue collections, may, therefore, be discernible in the second half of the financial year.