With the fiscal deficit touching the Budget estimate in eight months, the Finance Ministry has given clear signals of a cut in Plan expenditure. Plan expenditure is also known as developmental expenditure and comprises expenses on various flagship schemes, among others.
“Plan expenditure will be lower than the Budget estimate,” a key Finance Ministry official said here on Thursday, without giving further details . This is critical to keep the fiscal deficit under the Budget target of 4.1 per cent or ₹5.35 lakh crore in the current fiscal. The problem is that the deficit in the first eight months (April-November) has zoomed to 98.9 per cent, or ₹5.25 lakh crore.
To maintain the fiscal deficit within the Budget target, Plan expenditure has been lowered in previous years, too. However, Finance Ministry officials clarified that this is mainly a saving, as many Ministries and even States do not spend as per their allocations. Also, norms restrict over 33 per cent expenditure in the last quarter (January-March) of the financial year. Besides, there is stipulation that during March, the expenditure should be limited to 15 per cent of the Budget estimate.
Yet, the fact is that barring one year, Plan expenditure has been lower than the Budget estimate in past five fiscal years (2009-10 to 2013-14). Officials admit that this is the last resort to keep the fiscal deficit within target. Though, diesel deregulations, slump in crude prices and direct benefit transfer have brought some relief on key non-Plan expenditures, i.e. subsidy outgo, that is not sufficient to bridge the gap created by the estimated shortfall in receipts.
The Centre is facing a tough time on the revenue front. Net tax receipts in the first eight months have been just 42.3 per cent of the Budget estimate. The target for direct tax (personal, corporate, securities transaction and wealth taxes) is ₹7.36 lakh crore, which requires a growth rate of 15.3 per cent. Similarly, for indirect taxes (customs, Central excise duties and service tax), the target is ₹6.23 lakh crore, with a growth rate of 25.8 per cent.
Recent decisions of hiking Central excise duty on petrol-diesel and edible oil, besides rolling back lower excise duty on automobiles and consumer durables, are expected to bring down the shortfall in indirect revenue to ₹83,000 crore from ₹97,000 crore.
Yet, along with direct taxes, the overall tax shortfall is estimated at ₹1 lakh crore. On the non-tax side; disinvestment has given little over ₹1,700 crore, against the target of ₹58,425 crore.