The central government finances during the first half of 2008-09 may have witnessed buoyant tax collections but key deficit indicators such as revenue deficit (RD), gross fiscal deficit (GFD) and primary deficit have been higher reflecting higher non-plan revenue expenditure on subsidies, interest payments and plan revenue expenditure on social services, other economic services, and grants to states.
The December bulletin released by the Reserve Bank of India (RBI) in an article on central government finances (April-September 2008) has said accordingly, the first half of the current fiscal year indicate deterioration in all the key deficit indicators, both in absolute terms as well as per cent of GDP, over the corresponding period of the preceding year.
As per cent of budget estimates, both revenue deficit and gross fiscal deficit were higher mainly due to rise in revenue expenditure, both non-plan and plan.
Growth in revenue receipts was higher than that of the corresponding period last year on account of higher growth of net tax revenue.
The rate of growth of non-tax revenue was, however, lower partly because of decline in interest receipts. Capital expenditure maintained the growth momentum.
During the first half, revenue deficit stood at Rs 78,313 crore, formed 141.9% of the budget estimates as against 85.5% during April-September 2007 primarily due to expenditure pressure emanating from interest payments, subsidies, other economic services, social services and grants to states.
During 2008-09, GFD was budgeted to decline by 0.3% of GDP, to Rs 1, 33,287 crore over the provisional accounts of 2007-08. During the first half of 2008-09, GFD at Rs 1,02,654 crore was 77% of the budget estimates, higher than 53% a year ago reflecting the rise in RD.GFD as percentage of GDP was at 1.9% during April-September 2008, higher than 1.7% same time last year.
Meanwhile, gross primary deficit during the first half of 2008-09 stood at Rs 16,593 crore as against the envisaged surplus of Rs 57,520 crore in 2008-09 (budget estimates).
Talking about the revenue position, during April-Sep, revenue receipts registered an increase of 23.7% at Rs 2,44,898 crore, higher than 22.6% last year, as there was an increase in growth rate of tax revenue, notwithstanding the decline in growth rate of non-tax revenue.
Besides, gross tax collection of the centre during April-September stood at Rs 2, 80,141 crore, accelerated to 25.3% from 24.5% last year.
There was a sharp decline in the rate of growth of securities transaction tax, from 45.4% last year to 2.7% this year and fringe benefit tax, from 94% last year to 70.4% this year.
Non-tax revenue decelerated to 13.9% on account of decline in interest receipts.
Aggregate expenditure stood at Rs 3, 49,081 crore, registered a sharp rise of 23.6% compared to 12.1% a year ago. Going forward, while expenditure is slated to increase in the coming months, growth of tax revenue is likely to decelerate with the expected moderation in real economic activities following the global financial meltdown.