The country’s fiscal deficit — the difference between earnings and expenditure — in the first two months of the current fiscal (2014-15) touched 45.6 per cent of the Budget Estimate for the whole year; it was 33.3 per cent in the same period last year.
According to data released by the Controller General of Accounts (CGA), Government expenditure outpaced revenues. Non-Plan spending (interest, subsidy and defence) touched 18.3 per cent of the Budget Estimate against 13.4 per cent during the same period last year. However, Plan expenditure declined to 10.7 per cent against 12.3 per cent last year.
The Government’s oil subsidy bill amounted to ₹24,774.76 crore in the first two months of this fiscal as opposed to nil in the previous year.
In the Interim Budget, ₹63,500 crore was provided for the fuel subsidy, including a rollover of ₹35,000 crore.
It may be noted that normally the subsidy bill of the fourth quarter (January-March) is provided in the Budget of the next fiscal year and paid by June 30.
Meanwhile, tax collections during the first two months witnessed low growth. While income tax, service tax and other levies (mainly securities transaction tax) were higher than last year, corporate tax, Customs duty and excise duty were lower.
Optimistic on growth However, revenue authorities anticipate a buoyancy in tax collections, with expectations of growth picking up in the second half of the fiscal.
According to Aditi Nayar, Senior Economist with credit rating agency ICRA, the low growth in tax revenues in the first two months of this fiscal year was reflective of the sluggish economic activity during the pre-election period.
The trends in the first few months of a fiscal year, she said, should be interpreted with caution, as inflows from certain revenue streams are lower in the initial months, whereas the commitments, including salaries, pensions, interest payments and devolvement of taxes to States, are spread out fairly evenly through the fiscal.
“Thirty per cent of the increase in the Government’s total expenditure in April-May 2014 over the year-ago period is on account of higher interest payments.
Additionally, subsidy payments during the period appear to be substantially higher, contributing to the higher revenue expenditure,” she added.