The government seems walking the talk on enhancing public spending to perk up aggregate demand, given the slow pick-up in private investment and continued slackness in consumption. The Centre, which expended 8.7% of the total budgeted outlay and 7.6% of the estimated plan expenditure for FY16 in the first month of the year, would sustain the tempo over the next few months, senior officials said.
Although this would mean lesser scope for compressing expenditure in the final months of the year to meet the deficit targets, the idea now is to pan out spending in a more even manner than in recent years, with an emphasis on capital spending, the sources added. Asked whether the deficit targets could be given a miss if the revenue streams prove to be below the budgeted levels, the sources said the revenue would likely be in sync with the budget.
Expenditure compression was the principal tool employed by the Centre to meet its deficit targets in recent years; this was more obvious in FY14 and FY15, with the actual budget lower than the originally planned figures by 6.4% and 8.4%, respectively. Capital spending bore the brunt of the spending cuts. Capital spending (including the grants to states provided under the revenue account for creation of capital assets) for FY16 is pegged to be R3.5 lakh crore, up from close to R3.2 lakh crore last year. The Centre’s gross tax revenue (GTR) in April this year was 21% higher than in the corresponding month last year, at R34,816 crore. The GTR in April last year was just 2.5% higher than that in the same month in the previous year. But analysts said it was still too early to conclude that the budgeted 16% increase in tax revenue would be achievable given the struggling economy. GTR for 2014-15 stood at R12.45 lakh crore, showing a growth of 9% from a year ago.
“We have already made a good beginning in April that saw Plan capital spending of R11,050 crore, compared with R5,731 crore in the corresponding month last year. Also, the overall plan spending in the month was R35,160 crore, compared with R23,027 crore in the corresponding month last year, a 53% increase,” said an official source. “The April numbers (on spending) appear to be impressive. But, much depends on what happens to capital spending during the full year. It also remains to be seen whether the revenue would materialise as projected,” said N R Bhanumurthy, professor at the National Institute of Public Finance and Policy.
The government has so far maintained that the tax revenue target is realistic and would be achieved. Though it iterates that the ambitious disinvestment target of R69,500 crore would be met as well, independent observers don’t exactly share that optimism. The government’s total spending is projected to be R17.77 lakh crore in FY16, 8% higher than the R16.45 lakh crore in FY15. Though no alternative plan for revenue has been firmed up yet, the government is believed to be open to monetisation of surplus land with government entities, as an additional measure to bolster receipts.