NEW DELHI: The lopsided growth in fiscal deficit even as the financial year has hardly closed its first quarter has raised many an eyebrow among the keen observers of the country’s finances.
According to statistics available, India’s fiscal deficit in first quarter ended June hit 61.4 per cent of the budgeted target for the current fiscal, government data showed. However, the deficit was 68.7 per cent in the year-earlier period.
In absolute terms, the fiscal deficit stood at Rs4.32 lakh crore at the end of the quarter against a full-year target of Rs7.04 lakh crore. The government aims to restrict the fiscal deficit at 3.3 per cent of GDP in this fiscal, on the same lines in the previous year.
Capital expenditure during the April-June period was 18.8 per cent of the annual estimate compared with 29 per cent a year earlier, adding to worries about growth. Economists said a low growth momentum in the economy may hurt the government’s chances of meeting its fiscal deficit target for the year.
“While the first-quarter tax collections are affected by tax refunds of the previous year, the current growth momentum will have an impact on tax collections. On the whole, unless the consumption slow-down is reversed quickly, it will be a tough task for the government to achieve the FY20 fiscal deficit,” said DK Pant, chief economist at India Ratings.
Sakshi Gupta, India economist at HDFC Bank, concurred and added that weak growth impulses and poor job growth could become a pressure point for achieving the fiscal deficit target.
The Central government’s total expenditure reached Rs7.22 lakh crore in the first quarter, or 25.9 per cent of the budget estimate, compared with 29 per cent a year ago. Total receipts stood at about Rs2.9 lakh crore, or 13.9 per cent of the target, against 15.3 per cent a year earlier.
Expenditure on total major subsidies hit 51 per cent of the budget estimate compared with 44 per cent in the same period of FY19. Petroleum subsidies reached 76 per cent of the estimate compared with 47 per cent a year earlier.
“Expenditure on subsidies is going to cause a bit of fiscal stress because tax revenue collections continue to remain low,” said Gupta, adding that the government may need to even increase subsidy expenditure, particularly toward the Food Corporation of India (FCI) for procurement of food.