Fiscal deficit for April-Oct touches Rs 7.2 trillion, exceeds FY20 target

This was 102.4% of the full-year target, compared with 103.9% for the same period last year

The Centre’s fiscal deficit for the April-October period had touched Rs 7.2 trillion, exceeding the 2019-20 (FY20) budgeted target of Rs 7.04 trillion, official data showed on Friday. This was 102.4 per cent of the full-year target, compared with 103.9 per cent for the same period last year (2018-19 or FY19).

A boost in non-tax revenue, keeping revenue and capital expenditure at the same level as last year, had helped control the deficit.

Also, with the July-September gross domestic product data released on Friday, it can now be calculated that for the first half of 2019-20 (April-September), fiscal deficit as a percentage of nominal gross domestic product (GDP) was 6.6 per cent. This compares to the budgeted target of 3.3 per cent of GDP, which Finance Minister Nirmala Sitharaman stated in her maiden Budget speech on July 5.

The boost in non-tax revenue for April-October was primarily a reflection of the surplus passed on by the Reserve Bank of India after the recommendations of the Bimal Jalan panel on the central bank’s capital reserves. Data showed that dividends and profits, which includes dividends from state-owned banks and companies was Rs 1.58 trillion, or 97 per cent of the full-year target, compared with just 46 per cent for the same period last year.

“April-October non-tax revenue growth, mainly because of higher payout by the RBI to the central government has helped the government to limit fiscal deficit,” said Devendra Kumar Pant, chief economist of India Ratings.

For April-October, total expenditure stood at Rs 16.55 trillion, or 59.4 per cent of the full-year Budget Estimates, compared to 59.6 per cent for the same period last year. Capital expenditure for the seven months ending October was 59.5 per cent of the full-year target, compared to 59 per cent for April-October 2018, while revenue expenditure was 59.4 per cent compared to 59.7 per cent.

“The government has increased the expenditure towards asset creation while the revenue expenditure has marginally declined during the first seven months of 2019-20,” said Madan Sabnavis, chief economist with CARE Ratings.

Total revenue for the April-September period stood at Rs 9.3 trillion, or 44.9 per cent of the full-year target compared with 44.4 per cent for the same period last year. Given the economic slowdown, tax revenues came in at 41.4 per cent of the full-year target compared with 44.7 per cent last year.

It was the non-tax revenues and non-debt capital receipts which saved the numbers a little. Non-tax revenue was 71.6 per cent of the full-year target compared with 52.1 per cent for the same period last year, while non-debt capital receipts were 22.4 per cent compared with 20.8 per cent.

“In order to meet FY20 Budget Estimate of Rs .5 trillion, tax revenues in last five months has to grow by 47.3 per cent. To achieve the Budget target of Rs 6.63 trillion, the GST (goods and services tax) in past five months has to grow by 23.6 per cent. Economic growth in FY20 is likely to be 5.6 per cent and this does not instill confidence in achievement of 3.3 per cent fiscal deficit target unless there is steep expenditure reduction, which in the present scenario looks unlikely,” said Pant.