A steep 110% increase in the spending on the explicit subsidies was the primary reason why the Centre’s fiscal deficit in April-May 2017 soared to 68% of Rs 5.46 lakh crore estimated for the entire 2017-18. While Rs 1.17 lakh crore was released as subsidies in the first two months of this year, only Rs 56,000 crore was spent on this front a year ago. The front-loading of the subsidy amount, enabled by the early presentation of the Budget, will ease the liquidity problems for the intermediaries like Food Corporation of India and fertiliser firms.
The fiscal deficit in the first two months of 2016-17 was 43% of the annual estimate, while it was 37.5% of the relevant target a year ago. Subsidies apart, the April-May period also saw a 58% y-o-y rise in capex to Rs 52,536 crore, nearly half was defence-related. Other departments which benefited from the front-loading of expenditure included agriculture, urban development, human resource development and housing, all priority area of the Naredra Modi government.
In April-May, the Centre released food subsidy of about Rs 83,000 crore, which was more than double of Rs 41,411 crore incurred a year ago. The food subsidy spend in the first two months were 57% of the allocation of Rs 1.45 lakh crore for FY18. Fertiliser subsidy pay-out also grew 66% in April-May to about Rs 25,000 crore while fuel subsidy was Rs 9,600 crore compared to nil a year ago.
“The government departments which wanted to spend early were given the flexibility to do so. Of course, such department’s spending will be comparatively less in the remaining period of the year,” an official said. Thanks to early passage of Budget, the Centre’s expenditure in the first two months of this fiscal stood at Rs 4.59 lakh crore, 54% more than Rs 2.98 lakh crore a year ago.