The Centre's fiscal deficit in the first two months stood at Rs 1.81 lakh crore or 33.3% of the full year target for 2013-14 as tax collections remain subdued and plan expenditure shot up, Controller General of Accounts data showed. Of course, the increase in Plan spending is due to a deliberate effort to pump-prime the economy that grew at a decade's low in the previous fiscal, partly due to an aggressive expenditure compression.
Analysts said the latest deficit figure was not really cause for concern. They, however, warned that the rupee's fall could play spoilsport when it comes to meeting the fiscal deficit target of 4.8% of the GDP for 2013-14.
Last year, the government reined in the deficit at 4.9% of GDP, much below the revised estimate of 5.2%. Finance minister P Chidambaram asserted that the "red lines" on the fiscal deficit would not be breached.
Absence of big-ticket disinvestment and industrial slowdown added to the fiscal gap during April-May. The proposed Rs 20,000-crore stake sale of Coal India is under cloud as trade unions are threatening to go on strike. A rise in under-recoveries in diesel may also delay the stake sale in Indian Oil.
During the first two months of 2013-14, the government's revenue deficit stayed at Rs 1.45 lakh crore or 38.1% of the Rs 3.8 lakh crore budgeted for the entire fiscal year. In the same period last year, the revenue deficit was 33.8% of the budget target. "It's not an alarming situation as revenue flows in the first two months would be slow," said Saugata Bhattacharya, head of research of Axis Bank.
The Centre's receipts were at Rs 36,664 crore during April-May, which was just 3.3% of the budget target for 2013-14. Tax receipts were at Rs 27,783 crore or 3.1% of the full year's target, much lower than 5.3% during the corresponding period of last year.
Plan expenditure were at Rs 68,309 crore during April-May or 12.3% of the budget estimate for 2013-14, much higher than 8.6% in the same period last year. Non-plan spending were at Rs 1.49 lakh crore or 13.4% of the budget target.
The rupee fall since the beginning of the year is adding to the worries of a higher subsidy bill even though decline in oil prices are lending some comfort, said NR Bhanumurthy, a professor at the National Institute of Public Finance and Policy. "International prices of commodities are coming down and the rupee might reverse its downward trend against the dollar. Meeting the 4.8% fiscal deficit target will not be a surprise," he said.