Despite a likely shortfall of revenues under some tax and non-tax heads, the Centre is on track to achieve the fiscal deficit target of 3.2% of gross domestic product (GDP) for 2017-18, without cutting the budgeted spending of Rs 21.46 lakh crore, finance secretary Ashok Lavasa told FE in an interview.
Despite a likely shortfall of revenues under some tax and non-tax heads, the Centre is on track to achieve the fiscal deficit target of 3.2% of gross domestic product (GDP) for 2017-18, without cutting the budgeted spending of Rs 21.46 lakh crore, finance secretary Ashok Lavasa told FE in an interview. Lavasa added that the fiscal roadmap would be strictly adhered to. Capital expenditure could even exceed the budget target of Rs 3 lakh crore in the current year, he said. “The government is committed to achieve its fiscal deficit target,” said Lavasa, who is scheduled to superannuate on October 31. In the 2017-18 Budget, the Centre had deferred achieving 3% fiscal deficit by a year to 2018-19, due to the need to keep public spending robust to support economic growth in the absence of enough private investments and also the additional burden due to the pay hikes for the government staff.
Of late, there were some concerns that fiscal deficit may exceed the 3.2% target this year owing to likely revenue shortfall of about Rs 50,000 crore (27,341 crore from RBI, Rs 10,000 crore from spectrum and Rs 13,000 crore from excise duty cut on fuels). Tuesday’s government announcement of Rs 2.11 lakh crore bank capitalisation, which entails Rs 18,000 crore budgetary support also added to the pressure. The Centre’s expenditure in the first of this year stood at Rs 11.47 lakh crore (YoY growth of 11.7%) or 53.4% of the full year target of `21.46 lakh crore compared to Rs 10.27 lakh crore or 52% of the FY17 target in the corresponding period a year ago. However, H1FY18 capex growth was a moderate 8% at Rs 1.46 lakh crore, or 47.24% of the FY18 target of Rs 3.09 lakh crore; in the year-ago period, capex was about Rs 1.35 lakh crore or 54.6% of the FY17 target of Rs 2.47 lakh crore. “We will definitely achieve the capex number and in fact, it could be higher for the full year,” Lavasa said.
The secretary said it is too early to estimate revenue shortfall as the budget managers are currently in the midst of an exercise to assess requirements of various departments for balance part of this year and for next year and the corresponding revenue situation. The secretary said the department of economic affairs is in talks with the Reserve Bank of India (RBI) to explore if it could transfer some more dividend to the government this year. In August, the RBI sharply cut its annual dividend to the government to Rs 30,659 crore from Rs 58,000 crore budgeted by the Centre and about Rs 65,876 crore transferred in 2016. Telecom firms have pleaded difficulty in paying spectrum charges and license fees up to the budgeted Rs 44,342 crore. “On the whole, the effort is to achieve the fiscal deficit without compromising expenditure requirement,” Lavasa said. Revenue shortfall under some heads might be made up by other revenue heads. “We are very confident of meeting Rs 72,500 crore disinvestment target. To what extent disinvestment receipts can exceed the target this year, will depend on market conditions,” he added.
For the first time since annual disinvestment targets were regularly set in from FY11, the Centre is set to exceed an ambitious budget aim in FY18, thanks to planned government’s HPCL sale to ONGC, GIC IPO and a new diversified ETF. It also has a strong pipeline of offer for sales and strategic sales of PSUs. With the process of adjustment following demonetisation and roll-out of the goods and service tax more or less complete, Lavasa said the economic growth will pick up from Q3FY18 onwards and this year, allowing annual (FY18) growth of 7%.