Thanks to an all-time high surplus transfer from the Reserve Bank in August and earlier spectrum receipts which boosted revenue along with a an increase in tax collections, the Centre’s fiscal deficit narrowed to 66.5% of the FY16 estimate in the first five months of the fiscal, compared with 74.9% of the corresponding target in the year-ago period.
The fiscal deficit in April-August was Rs 3.69 lakh crore, while the deficit estimated in the Budget (BE) for the full year is Rs 5.56 lakh crore. The deficit was contained better than last year in the period under review despite an augmentation of capital spending to spur economic growth.
Revenue receipts have been rather strong, especially the non-tax revenue. Gross tax collections grew at 22.8% to Rs 3.99 lakh crore in April-August as against just 5% in the same period a year ago. After transfers to states, the tax revenue stood at Rs 2.09 lakh crore or 22.8% of the BE compared with 19% in the year ago period.
Total revenue receipts in April-August stood at Rs 3.45 lakh crore, or 30.3% of the BE of Rs 11.41 lakh crore, thanks to the central bank’s surplus profit transfer of Rs 65,896 crore, almost the entire surplus generated in 2014-15, to the exchequer. For the same period last year, revenue receipts were 22.7% of the BE.
Total expenditure in April-August was Rs 7.32 lakh crore or 41.2% of the BE, according to data compiled by the Controller General of Accounts. Total expenditure in the same period last year was 37.5% of the BE for that year.
While the deficit has been contained better than last year so far, there are some spending commitments for the governments to meet in later months. The government got Parliament’s approval in July to spend by Rs 25,500 crore more on recapitalisation of public sector banks and other entities.
The narrowing of fiscal deficit in the first five months could still remove concerns about achieving the target of 3.9% of GDP in FY16. Analysts say fall in crude prices and higher indirect tax collections due to increases in tax rates in the latest budget, could create fiscal space to spend more on the capital side.
In April-August, Plan capital spending stood at Rs 52,612 crore or 38.9% of the BE as compared to 31.4% of the full-year estimate during the same period last year. In April-July, the Plan capital spending was Rs 51,631 crore, indicating that the momentum has slowed in August.
Increase in Plan capital spending is crucial for the economy as it will help boost economic activity as a pick-up in private-sector investments have yet to pick up decisively. In April-August, Plan expenditure stood at Rs 1.86 lakh crore or 40.1% of the BE, which is a substantial improvement compared to30.9% of the BE in the year-ago period.
Non-Plan spending during the first five months of FY16 stood at Rs 5.45 lakh crore, or 41.6% of the BE against 40.6% of the BE of FY15.