Fillip to growth: Budget capex increases 65% in Q2; tax receipts slip

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Updated: November 01, 2019 4:55 AM

The Centre will likely scale up disinvestment programme this fiscal.

budget, current fiscalThe Centre has so far maintained that it will stick to the fiscal deficit target of 3.3% for the current fiscal.

A growth-hungry government has pressed the accelerator pedal on spending after a lull necessitated by election-related administrative disruptions, the latest data on central government finances released on Thursday showed. The year-on-year growth in the Centre’s total budgetary expenditure rose from (-)11% in June to 34% in September; spending grew 28% in Q2, against just 2% in Q1.

Amid rising concerns over a big slippage in tax revenue, the quality of spending also improved in recent months. Budgetary capex surged 65% y-o-y in Q2, while the previous quarter had seen a 28% contraction.

According to the Controller General of Accounts data, the Centre’s fiscal deficit in April-September FY20 came in at Rs 6,51,554 crore or 92.6% of the budget estimate for the whole of the fiscal year. That was, however, still a less precarious situation than in H1 last year when the said deficit was 95.3% of the target for the whole fiscal. What came to the government’s rescue was the `58,000 crore extra receipts from the RBI following the reformulation of its economic capital framework. Last year, as the tax growth faltered, the Centre had cut the budget size by Rs 1.3 lakh crore or 5.35% from the originally projected level (BE), yet it let the deficit slip to 3.4% of the gross domestic product (GDP) against BE of 3.3%.

With the GST and direct tax revenue falling considerably short, net tax receipts (after mandatory transfers to states) grew just 4.2% in H1FY20 against the required rate (BE FY20 against FY19 actuals) of 25.3%. Net tax revenue grew just 3% in Q2, half the rate at which it grew in Q1.

Against a full-year growth target of 17.4% for direct tax collections, the mop-up (net of refunds) in April-September was Rs 4.5 lakh crore, just 6% higher than collections in the same period a year ago.

The Centre has so far maintained that it will stick to the fiscal deficit target of 3.3% for the current fiscal.

According to sources, the government scouting for avenues to bolster its revenue after the recent corporate tax cuts, which could cost Rs 1.45 lakh crore on a gross basis through the fiscal. Net tax revenue, the largest inflow to the exchequer, might fall short by Rs 90,000 crore.

The Centre will likely scale up disinvestment programme this fiscal.

Disinvestment revenue is projected to be Rs 1.05 lakh crore (BE) and mop-up could be significantly higher as big ticket strategic sales are on the cards.

In FY9, the Centre had taken an advance of Rs 28,000 crore as dividend from the RBI. It is hopeful of an interim dividend of similar size from the central bank this fiscal as well, although the RBI governor said on October 4 that no such demand was placed before it by that time. With PM-Kisan progressing at a slower pace than expected, the Centre could save Rs 15,000-20,000 crore.

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