Targets not met, says CAG
DESPITE COMMITTING to the path of fiscal consolidation, the government failed to meet its fiscal and revenue deficits targets in 2016-17, noted the Comptroller and Auditor General (CAG) of India in its latest report. As seen in Chart 1, against the revenue, fiscal and effective revenue deficit targets of 2.1, 3.3 and 0.9 per cent of GDP, respectively, in 2016-17, the achievement was 2.1, 3.5 and 1 per cent, respectively.
In its report, the CAG has also made some stinging observations on the Centre's compliance with the Fiscal Responsibility and Budget Management (FRBM) Act, 2003.
First, as seen in Chart 2, there is marked variation in the fiscal deficit numbers presented in the budget and those derived from annual financial statements/union government’s finance accounts noted the CAG. Second, direct tax refunds have risen sharply over the past few years from ~90,432 crore to ~1.72 trillion in 2016-17 as shown in Chart 3. But as the CAG noted, no corresponding disclosure was available in the Government accounts. Third, the government has increasingly resorted to off-budget financing of expenditure. For instance, on the revenue side, off-budget financing was used for covering and deferring fertiliser arrears/bills (Chart 4) and arrears of FCI (Chart 5) through borrowings. Similarly, on the capital side, off-budget financing of railways carried out through IRFC borrowings are outside budgetary control. They are not part of calculation of fiscal indicators despite fiscal implications. Fourth, actual government liabilities are higher than what was shown. As seen in Charts 6 and 7, taking into account the understatement of Public Account liability of ~7.6 trillion, the total liability of the central government at the end of the financial year 2016-17 works out to 50.5 per cent of GDP rather than 45.5 per cent. This was against the projection of 47.10 per cent presented in the medium-term fiscal policy statement 2016-17.