More worrying is the Centres astronomical revenue deficit at 315% of the budgeted target to Rs 1,73,830 crore between April-December 2008. A year ago till December 2007, it was at 54.9% of the BE. Even till November 2008, the Centres revenue deficit was much better at 256.2% of the full fisc target. Experts however say that the high deficit figures should not be considered shocking. This does not come as a surprise as government spending has been much higher this year, be it the farm loan waiver or the pay commission implementation. There has been an indication of fiscal slippage in the past months and we expect the fiscal deficit to amount to 6.2% of the GDP in 2008-09, DK Joshi, principal economist Crisil said. The Prime Ministers Economic Advisory Council in a review last week estimated that the Centres fiscal deficit could go up to 8% of the GDP in 2008-09, including the off budget items. These are strict deficit numbers and dont include off budget liabilities. So they are much lower than our estimates, Suresh Tendulkar chairman PM EAC said.
In the Budget, the Centre had estimated to bring down fiscal deficit to 2.5% of the GDP and revenue deficit to 1% of GDP in 2008-09. But despite the astonishing rise, international debt-rating agencies are unlikely to downgrade India from its investment grade earned in 2007. As Tendulkar pointed out, This is a cyclical phenomenon having its roots in the turbulent economic scenario. The finances of all countries are affected by it. Meanwhile, the Centres primary deficit too has increased to Rs 94,527 crore or (-)163.4% of the BE during April to December 2008 as compared to 424.8% of the BE a year ago. With the slowdown in economic activities, revenue receipts till December 2008 are lower at 62.4% of the BE or Rs 3,75,937 crore. The governments coffers were fuller at 73.1% of the full fiscal target a year ago. Tax revenue too is lower at Rs 3,09,927 crore or 61.1% of the BE owing to the lower payments by companies in the third tranche of advance tax payments ending December 15. Indirect tax collections too have dropped because of the 4% cut in Cenvat rate. In sharp contrast till December 2007, tax revenue amounted to 73.3% of the BE.
Adding to the fiscal mismatch in its balance sheet, the Centres total expenditure has risen to Rs 5,97,216 crore - nearly 80% of its full year spend target of Rs 7,50,884 crore. It was much lower at 69.7% a year ago. While non plan expenditure amounted to Rs 4,26,419 crore or 84% of the BE, plan expenditure stood at Rs 1,70,797 crore - 70.2% of the full year target.