Revenue shortfall: Centre curbs expenditure to stick to fiscal line

By: |
Published: February 29, 2020 4:00:02 AM

April-January fiscal deficit at 129% of FY20 target.

economy, india economyCapital expenditure in the first 10 months of the fiscal stood at Rs 2.68 lakh crore, 75.5% of the full-year estimate (RE) of Rs 3.48 lakh crore.

Hit by a huge revenue shortfall, the Centre has imposed strict curbs on expenditure, data for April-January released on Friday showed. Total expenditure in the April-January period stood at Rs 22.68 lakh crore, or 84.1% of the revised estimate (RE).

Capital expenditure in the first 10 months of the fiscal stood at Rs 2.68 lakh crore, 75.5% of the full-year estimate (RE) of Rs 3.48 lakh crore.

The Centre’s decision to cap Q4 spending at 25% of the Budget estimate for the full financial year, compared with the norm of 33%, itself could result in an annual spending compression of nearly Rs 2.2 lakh crore, versus revised estimate of Rs 26.98 crore. So there could be curbs on spending in February-March.

If the trend in tax receipts in recent years are any indication, the shortfall in net tax receipts (post transfers to states) could still be about Rs 36,000 crore from the revised estimate (RE), which itself was lower than the Budget estimate (BE) by over Rs 1.4 lakh crore. Of course, if the direct tax dispute resolution scheme, Vivad Se Vishwas, yields a tidy sum and a god part of it is accounted for in FY20, then the shortfall would reduce.

As per the CGA data, net tax revenue during April-January came in at Rs 9.9 lakh crore, a contraction of 2.1% year on year; while the RE pegged the growth for FY20 at 14% over the actual collections in the last financial year. This was largely due to a steep fall in corporate tax collections, which declined 13.5% over the April-January period last year.

The fiscal deficit touched 128.5% of the whole-year Budget target during the April-January period. The deficit in the year-ago period was 121.5% of the corresponding target. The government had targeted to restrict the fiscal deficit (RE) at Rs 7,66,846 crore for the year ending March 31, 2020.
Finance minister Nirmala Sitharaman had raised the fiscal deficit target to 3.8% of the GDP, from 3.3% pegged earlier for 2019-20 due to revenue shortage.

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Next Stories
1Eastern India will play key role in driving economic growth, says Dharmendra Pradhan
2Govt focussing more on political, social agenda than economy: Former RBI Governor Raghuram Rajan
3Coronavirus to hit energy sector, to cut 2020 oil, gas investments by $30 billion