Fiscal deficit at 96% of full-year target

In what could dash hopes of stimulus to propel the economy, the Centre’s fiscal deficit for April-August came in at ~5.25 lakh crore, the highest ever for this period compared to any previous year.

The deficit for the first five months of the year stood at 96 per cent of the full-year target of ~5.46 lakh crore despite cut in capital expenditure in August. The trend is contrary to the earlier pattern when expenditure was front-loaded, at least for capital outlays.

For the same period last year, the fiscal deficit stood at 76.4 per cent of the full-year target.

The data reflected goods and services tax (GST) collection in full scale for the first time.

Released by the Controller General of Accounts on Friday, the data came at a time when there have been discussions within the Narendra Modi government regarding a possible stimulus package through higher capital spending to boost manufacturing and infrastructure and to create jobs. Any fiscal stimulus could lead to a higher-than-budgeted fiscal deficit for 2017-18.

The target for the year as percentage of gross domestic product is 3.2 per cent, already under stress because nominal GDP growth in 2017-18 might not be 11.4 per cent as assumed in the Budget. For the first quarter, nominal GDP grew only 9.3 per cent.

For April-August, tax revenue stood at ~3.41 lakh crore, about 28 per cent of the full-year Budget Estimates, compared with 26.6 per cent for the same period last year. For the first time, the GST figures were taken fully into account. For August, Central GST contributed ~15,263 crore to the kitty.

“If the lack of clarity on the post-GST buoyancy of revenues after netting of refunds persists over the next two to three months, it may cloud the budget planning process for FY19,” said Aditi Nayar of ICRA.

Non-tax revenue was ~69,256 crore, or 24 per cent of the full-year target, compared to 32.5 per cent for April-August last year. “The sharp y-o-y decline in non-tax revenue receipts is likely to reflect the lower surplus being transferred by the RBI,” added Nayar.