Spending on explicit subsidies rose 47% even as tax revenue receipts remained subdued
The Centre’s fiscal deficit in April-June 2017 soared to nearly 81% of the Rs 5.46 lakh crore estimated for 2017-18, largely due to a steep 47% increase in spending on the explicit subsidies even as tax revenue receipts remained subdued. The fiscal deficit in the first three months of 2016-17 was 61.1% of the annual estimate; in the corresponding period of 2015-16, it was 51.6% of the relevant target. While Rs 1.37 lakh crore was released as food, fertiliser and fuel subsidies in the first three months of this year, only `93,500 crore had been spent on this front a year ago. Nonetheless, 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.
Subsidies apart, April-June also saw a 39% year-on-year rise in capex to Rs 68,328 crore, nearly half of which was defence-related. Other departments which benefited from the front-loading of expenditure included roads, agriculture, urban development, housing and railways, all priority areas of the government.Thanks to the early passage of Budget for 2017-18, the Centre’s expenditure in the first three months of this fiscal stood at Rs 6.51 lakh crore, 27%% more than Rs 5.12 lakh crore a year ago as departments were given flexibility to front-load spending depending on requirement.
However, tax revenues did not keep pace with spending momentum. The Centre’s net tax revenue, after transfer of states’ share, was Rs 1.77 lakh crore, or 14.5% of the 2017-18 target; a year ago, it stood at 14.9% of the full-year target. Gross tax revenues grew only by 15% year-on-year to `3.23 lakh crore in the first quarter of 2017-18. Excise duties grew by only 7% y-o-y during the period. Analysts predict that the overall indirect tax revenue growth could plummet in Q2FY18, after the GST was rolled out from July 1, primarily due to transitional issues.
Primary deficit (PD), fiscal deficit minus interest payments that reflects government’s efforts at bridging the fiscal gap during a financial year, has soured in Q1 of this year. The PD surged to Rs 3.08 lakh crore or 1,314% of the 2017-18 target compared to 527% a year ago. The revenue deficit, the gap between the revenue expenditure and current revenue receipts, also rose sharply to 119.1% of the full-year target compared to 79.6% a year ago.
In April-June this year, the Centre released a food subsidy of about Rs 92,900 crore, which was 54% higher than Rs 60,200 crore incurred a year ago. The food subsidy spend in the first three months were 64% of the allocation of Rs 1.45 lakh crore for 2017-18. Fuel subsidy was Rs 16,000 crore compared to Rs 5,100 crore a year ago while fertiliser subsidy pay-out was at Rs 28,000 crore in April-June this year, nearly at the level of the year-ago period.