The central government has likely achieved the fiscal deficit target of 4.1% of GDP in FY15 through a mix of additional spending cuts over the revised estimate and higher non-tax revenue receipts, sources said.
The government likely cut expenditure by about Rs 10,000 crore from the revised estimate level of Rs 16,81,158 crore for the last fiscal year. The additional spending squeeze is in addition to a whopping Rs 1,13,734 crore cut effected in the Budget presented in February on the back of slower growth in tax collections.
However, the Rs 10,000 crore additional spending cut is modest compared to the average Rs 21,571 crore reduction effected over the revised estimate of expenditures between FY11 and FY14 to achieve fiscal deficit targets.
Though officials were a bit jittery over an internal estimate that direct tax collections might fall short of target by Rs 25,000 crore, the shortfall is believed to be much less, at around Rs 5,000 crore as collections got a boost in the last few weeks of the fiscal.
The direct tax collections shortfall would be partly offset by higher indirect tax collections, which exceeded the budget target by Rs 4,000 crore. “Also, the government will likely get about Rs 7,000 crore extra in non-tax revenues than seen (in RE),” a source said. The extra cash flow was expected from fees, cess, penalties, among others.
Yet, the government may have to roll over an additional Rs 8,000-9,000 crore worth of fuel subsidies to FY16 to keep the overall subsidy bill at the revised estimate level of Rs 2,66,692 for FY15, sources said. The government had rolled over Rs 35,000 crore fuel subsidy from FY14 to FY15.
In April-February of FY15, the government’s major subsidy — food, fertiliser and fuel — spending stood at about Rs 2.38 lakh crore or 94% of the full year estimate of Rs 2.53 lakh crore.
In recent years, the central government has managed to achieve the fiscal deficit by cutting productive spending (capital expenditure) as subsidy bills mounted, while tax collections growth remained weak. In the FY15 budget, capital expenditure was cut 15% to Rs 1,92,378 crore (revised estimate over Budget estimate).
To reverse this trend, the government has proposed a 25% increase in capital expenditure to Rs 2,41,430 in the budget for FY16.
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