The Centre’s fiscal deficit for the first two months of FY16 was about R2.08 lakh crore or 37.5% of the full year target of Rs 5.56 lakh crore, a situation better than in the year-ago period. It curbed revenue expenditure while keeping the momentum of capital spending, which the economy is in dire need of, given that pick-up in private-sector investment is slow.
In the corresponding period last fiscal, the fiscal deficit was 45.3% of the full year target. Revenue receipts during April-May were R52,361 crore, or 4.6% of the full fiscal target of R11.41 lakh crore, thanks to R26,098 crore received from auction of telecom spectrum. For the same period last year, revenue receipts were 3.2% of the full-year target.
However, tax revenues haven’t performed very well. The April-May net tax collection was R19,889 crore, which is 2.2% of the estimate for the full year; in the corresponding period a year ago, the net tax revenue stood at 2.9% of that year’s target. The government had cited a 39% increase in (gross) indirect tax collections in April-May, greatly helped by a favourable base, to argue that the economy was looking up. Even after stripping down additional levies imposed this year, collection of these taxes grew 12.6% in April May, senior policymakers had noted.
According to the data compiled the Controller General of Accounts, the total expenditure was R2.63 lakh crore in April-May or 14.8% of the budget estimate (BE) for the full year. Total expenditure in the corresponding period last year was R2.8 lakh crore, or 15.6% of the BE for the year.
In April-May, Plan expenditure (which includes capital spending’s major part) stood at R62,106 crore or 13.4% of the full year aim, which is an improvement compared to R59,609 crore (10.4%) in the year-ago period. Spending on road construction topped under this category, followed by rural development, education, atomic energy, water and sanitation projects. Indicating savings on subsidies etc., non-plan spending during the first two months of FY16 stood at about R2 lakh crore, or 15.3% of the full year target, while the corresponding amount for the year-ago period was R2.2 lakh crore or 18.1% of the estimate for the full year.
All eyes are on the government expenditure this fiscal to stimulate the economic activity on the back of weaker private spending. Keeping that in mind, the government extended the fiscal consolidation road map by one year to FY18, to bring down the fiscal deficit to 3% of GDP. The fiscal deficit target is pegged at 3.9% for FY16, a tad lower than 4% in FY15. Capital spending (including the grants to states provided under the revenue account for creation of capital assets) for FY16 is pegged to be R3.5 lakh crore, up from close to R3.2 lakh crore last year.
Plan capital spending — mainly on asset creating projects — and is seen crucial to revive investment this year, stood at R18,375 crore or 13.6% of the BE compared to 11.4% in the year ago period. However, the pace of capital spending has slowed down a bit in May compared to April. In April, the capital spending was R11,050 crore or 8.2% of the BE, which was much higher than 5.5% in the same month last year.
Revenue deficit, which is seen by many as a better measure of government finances, stood at R1.73 lakh crore, 43.8% of the full year target in April-May, as against 54.2% in the year ago period. Going forward, meeting expenditure commitment hinges on achieving the tax revenue targets this year, analysts said.