April-Oct fiscal deficit at 96% of BE Core sector growth drops to 4.7% in Oct
The Centre’s fiscal deficit for AprilOctober, the first seven months of the financial year, was ~5.25 lakh crore or 96.1 per cent of the full-year target of ~5.46 lakh crore.
Incidentally, the deficit at the end of August was at the exact same level, which shows the finance ministry, after ‘front-loading’ of expenditure, has reined in spending and plans to do so further in the second half of 2017-18.
The deficit for AprilOctober last year was 79.3 per cent of the 2016-17 full-year target. For April-September this year, it was 91.3 per cent.
Total expenditure for AprilOctober was ~12.92 lakh crore or 60.2 per cent of the full-year estimate of ~21.47 lakh crore, official data showed on Thursday. Total expenditure for October was ~1.43 lakh crore, compared with nearly ~2 lakh crore in September. The Centre’s capital expenditure, too, has been reined in. It was ~16,406 crore in October, compared with ~36,741 crore in September. Revenue expenditure for October was ~1.27 lakh crore, compared with ~1.62 lakh crore in September.
Finance Minister Arun Jaitley is aiming to stick to the deficit target of 3.2 per cent of gross domestic product (GDP) for 2017-18. After JulySeptember GDP data was issued on Thursday as well, it can now be inferred that the fiscal deficit for that first half of the financial year was 6.3 per cent of AprilSeptember GDP (current prices), of ~79.06 lakh crore.
At an event here before the release of deficit data, Jaitley reiterated he intended to be on track to meet the target for this year. “The last three years, we have an exemplary record as far as maintaining that (fiscal) glide path is concerned. We intend to move on that track,” Jaitley said. This comes at a time when there is uncertainty within and outside the government on whether revenue from the nationwide goods and services tax (GST), rolled out from July 1, would be below expectation or not.
Analysts, however, were doubtful. “Inching up of the deficit for April- October 2017 highlights the lingering concerns related to the possibility of a fiscal slippage. The risk of one stems primarily from the growing likelihood that tax and non-tax revenues would undershoot the budgeted level,” said Aditi Nayar, principal economist at ratings agency ICRA.
Given the front-loading of expenditure in the early part of the year, said Nayar, capital outlay would have to contract by 16.8 per cent in the last five months of 2017-18 to avoid exceeding the Budget Estimate.
“There have been some disruptions in the form of GST, which has made the collection numbers complex, as the proceeds have to also be used to compensate states. Hence, the final impact on the central finances would be driven by how this matrix works out,” said Madan Sabnavis, chief economist at CARE ratings. He said unless additional resources were raised, there could be cuts in expenditure.
Net tax revenue for AprilSeptember was 51.6 per cent of the full-year target. Non-tax revenue, including dividends from state-owned entities, was only at 30 per cent of full-year estimates compared to 52 per cent last year. Non-debt capital receipts, which include disinvestment, were 45.7 per cent of the Budget Estimate. Eight core sectors grew at a slower pace of 4.7 per cent in October, chiefly due to subdued performance of cement, steel, and refinery segments.
The eight infrastructure sectors — coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, and electricity — had clocked a growth of 7.1 per cent in October last year. Meanwhile, the industry ministry has revised downwards September growth print of these eight sectors to 4.7 per cent from the earlier estimate of 5.2 per cent. Official data released this evening showed that cement production contracted by 2.7 per cent, against an expansion of 6.2 per cent in October 2016. Output growth in the steel segment too slowed to 8.4 per cent in the last month, compared to 17.4 per cent in the year- ago period.
Similarly, there was slowdown in refinery output, whose growth was 7.5 per cent in October this year. This compares with a 12.6 per cent expansion in the same month last year. Electricity generation, too, was slower on an annual basis. The coal segment has shown significant improvement, as it expanded by 3.90 per cent. It witnessed a decline of 1.9 per cent in the year-ago period. The fertiliser sector grew by 3 per cent, against 0.7 per cent last year. Crude oil production and natural gas output have shown improvement, too.
Cumulatively, the growth in the eight core sectors slowed down to 3.5 per cent, against 5.6 per cent in the comparable period of the last fiscal year.