The government’s fiscal deficit touched 114.8% of the full-year estimates at the end of November.
What is the current fiscal scenario?
Fiscal deficit is the difference between total revenue and total expenditure of the government.
It is an indication of the total borrowings needed by the government.
The government had budgeted fiscal deficit of Rs 6.24 lakh crore, or 3.3% of the GDP, for FY19.
Fiscal deficit for April-November stood at Rs 7.16 lakh crore, or 114.8% of the target.
It is slightly more than the 112% recorded in the same period last fiscal.
What is the possible cause?
Total expenditure up to November was 66.1% of the budget estimate of Rs 24.42 lakh crore.
It thus suggests that the subdued tax receipts largely contributed toward inflating the deficit.
Total receipts stood at Rs 8.9 lakh crore, or 49.3% of BE, against 54.2% for the same period last fiscal.
Net tax receipts were only 49.4% of estimates compared with 57% last year.
Disinvestment proceeds and GST revenues were not as expected.
[But the provisional settlement of Integrated GST and residual GST compensation cess (after disbursal to states) could provide some help in augmenting cash flows in coming months.]
How does the future look?
Fiscal - The deficit could widen the gap between the target set for FY19 and the final tally.
There are several risks to meeting the budgeted targets for revenues and expenditures.
A predominant concern arises from a possible shortfall in indirect tax collections.
Revenue - A positive feature in the revenue front is the optimism seen in non-tax revenue.
It has surged more than 31%, putting the government comfortably on track to meet the budget estimate for a 3.9% increase.
However, non-tax revenue is budgeted to account for just over a seventh of total revenue.
So it could only contribute a small part in addressing the shortfalls in tax receipts.
Besides, seven public sector enterprises have been cleared for share sales as part of the disinvestment programme.
But even these are likely to only partly help meet the budgeted non-debt capital receipts.
Expenditure - Some of the government's expenditure plans committed to recently are not conducive for handling the deficit situation.
These may include public sector bank recapitalisation, increase in the quantum of incentives for the export of onions to reverse the slide in prices and the like.
Also the general elections are approaching, wherein expenditure needs a cautious handling.
The onus is on the government to avoid further fiscal slippage as it could hurt the economy by crowding out vital private investment.
