BS analyses fiscal math and Budget expectations

DESPITE REPEATED assurances from the government, it is highly likely that the Centre may not be able to meet its gross revenue target in FY18. As shown in Chart 1, the indirect tax collection target was ~926 billion for FY18. But to date collections under the goods and services tax (GST) have been below expectations. Only 66.7 per cent of assessees filed returns in December, while collections under the compensation scheme also were subdued.

Non-tax revenue collection also appears to be under pressure, with the Reserve Bank of India (RBI) transferring a lower than expected dividend, as shown in Chart 2. But recent reports suggest the RBI may well transfer a higher amount.

Disinvestment proceeds, however, provide some cheer. As shown in Chart 3, the Centre has mopped up ~523.8 billion till the end of November as against a budgeted target of ~725 billion. With ONGC’s purchase of the government’s stake in HPCL for ~369.15 billion, the Centre will surpass its disinvestment target for the first time since 2009. Reports suggest the Centre could ramp up stake sales, pushing disinvestment proceeds to ~1 trillion this year.

On the expenditure side, as shown in Chart 4, the government has spent 69 per cent of the budgeted amount by November. But capital spending, which was ramped up in the first quarter of FY18, has slowed subsequently (Chart 5). On the other hand, as shown in Chart 6, 86 per cent of the subsidies budget has been exhausted by November.

With revenue falling short of expectations, analysts said the Centre was unlikely to meet its fiscal deficit target of 3.2 per cent in FY18. As shown in Chart 7, it has already surpassed the fiscal deficit target by the end of November.

By all accounts, the upcoming Union Budget is likely to focus on the rural economy and boosting public sector capital expenditure. Charts 8 and 9, respectively, show the Centre has upped its allocations to the Ministry of Agriculture and Farmers Welfare as well as to the schemes focused on rural areas over the past few years. As far as public investment is concerned, spending in sectors such as roads, railways, defence and urban development has already soared by close to 50 per cent in the past two years (Chart 10). Both these trends are likely to sustain in the coming Budget.