The surge in non-Plan expenditure has left economists divided over the Government’s ability to achieve the fiscal deficit target. Non-Plan expenditure makes up over 68 per cent of the total expenditure.
The fiscal deficit in the first two months has already crossed 45.6 per cent of the Budget target for the full fiscal. This deficit is the difference between the Government’s income and expenditure and is bridged by borrowing. Non-Plan expenditure refers to spending on interest, subsidy, Defence and salary as well as pensions.
The Government has set a fiscal deficit target of 4.1 per cent of GDP for the current year. Non-Plan expenditure is estimated at ₹12.19-lakh crore, of a total expenditure of around ₹18-lakh crore.
Monthly data from the Controller General of Accounts, who tracks Government revenue and expenditure, show that non-Plan expenditure in the first two months (April-May) of the current fiscal clocked was 48 per cent higher than in the corresponding period last fiscal.
Expenditure control According to the Chief Economist and Senior Director of India Ratings, Devendra Kumar Pant, this means that for the remaining 10 months of this fiscal, non-Plan expenditure growth will have to be reined in at 3.4 per cent to attain the Budget target.
“Given the committed nature of non-Plan expenditure, this again looks difficult. In such a scenario, the 4.1 per cent fiscal deficit and 2.9 per cent revenue deficit targets clearly look difficult to achieve, unless planned expenditure is compressed as in previous years or expenditure is rolled over to the next fiscal,” Pant said.
The Budget assumes nominal GDP growth of 13.4 per cent in 2014-15, against 12.3 per cent in 2013-14.
This will lead to a net tax revenue growth of 16.9 per cent as against 12.7 per cent in 2013-14 and non-tax revenue growth of 9.9 per cent, against 40.7 per cent in 2013-14.
Pant said given that the economy is in a sluggish phase, attaining the estimated tax revenue growth looks difficult. He said the disinvestment target seems too optimistic. In fact, the disinvestment target set out in the Budget, at ₹63,325 crore, is the highest till now.
Another take Meanwhile, Aditi Nayar, Senior Economist with ICRA, has a different view. She said that non-Plan revenue expenditure (total non-Plan expenditure minus capital expenditure) in April-May 2014 rose by 56 per cent over 2012-13. Around 27 per cent of this increase is on account of interest payments. Additionally, major subsidies in these two months appears to be substantially higher than in the same months of 2013.
“However, this up-fronting of release of subsidy by the Government is more likely a matter of sequencing and does not necessarily point to an overshooting of targets set in the Budget for 2014-15,” she said.
The extension of the deadline for identification of beneficiaries by State Governments under the National Food Security Act, the allocation for food subsidy for 2014-15 appears to be adequate.
The fuel subsidy amount carried forward from last fiscal is estimated at over ₹30,000 crore and gross under-recoveries of oil marketing companies are projected at ₹1.04-lakh crore in 2014-15.
“ICRA believes the fuel subsidy allocation for the current fiscal could be largely adequate if the absolute burden of upstream companies remains at 2013-14 levels — ₹67,000 crore,” she said.