Eight months into the financial year, or until end November, the Union government’s fiscal deficit — the amount by which its expenditure exceeds revenue — had already overshot the year’s budget target by a significant ₹65,573 crore. And as in everything with numbers, there are several interesting insights to be had, some fairly straightforward and self-explanatory and others less obvious and disconcerting. One of the biggest contributors to the wider fiscal slippage has clearly been the faster pace at which total expenditure has grown. While the government had in the Union Budget provided for overall spending to increase by a modest 6.6% over the revised estimates for the previous fiscal, data for April-November released by the Controller General of Accounts show a 14.9% jump year-on-year. A look at the individual ministries and how they have front-loaded their spending shows wide variability with several ministries still significantly under utilising their budget allocations over the first eight months. (One of the government’s aims when it advanced the budget presentation by a month to February 1 was to ensure that government departments had adequate time to spend the funds apportioned to them in an optimal manner.) Similarly, revenue receipts for the eight-month period have shown an underwhelming 1.1% year-on-year increase while the budget projection was for 6.5% growth. Even if some of the sluggishness in revenue receipts can be explained by the fact that the current year has been a one-off, transitional period given that the GST regime was implemented from July 1, there are other pressure points that policymakers need to square up with. Non-tax revenue at 36.5% of budget estimates compares unfavourably with the 54.2% garnered in the corresponding period of the previous year.
There is also the issue of how the government is likely to account the additional capital it has announced as part of the recapitalisation effort to bolster the financial health of public sector banks. There is the additional ₹50,000 crore in market borrowing that the government has planned for the fourth quarter — a move it has said will not significantly impact the fiscal calculus since it simultaneously plans to scale back collections from treasury bills. The fiscal gap has widened in spite of a healthy jump in non-debt capital receipts, which include the ₹17,357 crore the government received from the public listing of state-run insurance companies, and steady improvements in corporate and personal income tax collections. That the figures revealing the fiscal slippage have come less than two months after Moody’s upgraded India’s sovereign credit rating serves as a reminder that there is little room for complacency. With monetary authorities at the RBI having reiterated the inflationary risks that a worsening fiscal gap would pose, and private investment still struggling to gain traction, policymakers would do well to try and regain their footing on the crucial path of fiscal consolidation.