Fiscal deficit zooms to 56% of Budget target in April-June

The Fiscal deficit, the difference between earning and expenditure of the Government, has exceeded 56 per cent in the first three months (April-June) of the current fiscal.

The Government has set a target of ₹5.31 lakh crore, or 4.1 per cent of GDP. According to data released by the the Controller of General Accounts (CGA), fiscal deficit in the first three months touched ₹2.98 lakh crore. This is 56.1 per cent of the Budget target against 48.4 per cent during the corresponding period last fiscal.

The expenditure during April-June of the current and previous fiscal is at the same level of 23 per cent of the Budget target.

However, the problem is with revenue collection.

This fiscal, revenue mobilisation slipped to 9.2 per cent from 10.6 per cent of the target.

In fact, both tax and non-tax revenue mop-up as a percentage of the Budget targets were less than in the last fiscal.

Tax collection stood at 10.1 per cent, against 11.5 per cent of the target, while non-tax revenue mobilisation was 7.2 per cent, against 8.9 per cent of the target.

Another reason for the higher fiscal deficit could be payment of fuel subsidy. It is a normal practice that subsidy due of the last quarter (January-March) of the previous fiscal is paid during the first quarter (January-March) of the current fiscal.

This quarter, the Government paid ₹24,849 crore as fuel subsidy, which is 39 per cent of the Budget target, against 34 per cent in the last fiscal.

Aditi Nayar, senior economist with research agency ICRA, said that at an absolute level, the fiscal deficit in the first quarter is 13 per cent higher than the level in the corresponding period last fiscal, partly on account of unfavourable tax growth. This is a cause for some concern, she added. Nayar felt that although the fiscal deficit in the first quarter of the current fiscal exceeded half of the Budget estimate, fiscal trends for the early part of the year should be interpreted with caution.

“While inflow from various revenue streams tends to be lower in the first quarter of each fiscal – particularly disinvestment, tax collections and dividends – expenditure is spread out relatively more evenly throughout the fiscal, such as employee expenses,” she said.