Fiscal deficit down 39.08% to Rs1.86 trillion in April

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Nevertheless, expenditure by the central government rose by 15% during the period to Rs6.90 trillion from 6.21 trillion in the year-ago period.

The Centre’s fiscal deficit narrowed by 39.08% year-on-year to Rs1.86 trillion in April-November, 2010, on the back of better-than-expected revenue from the sale of spectrum and robust tax collections.

In comparison, the central government’s fiscal deficit stood at Rs3.06 trillion in the corresponding period of the previous financial year.

The sharp fall in the Centre’s fiscal deficit was also due to the fact that despite the enhanced flows to the central exchequer, there was not a commensurate increase in expenditure by the government and the Reserve Bank has blamed this for the present cash crunch in the system.

Nevertheless, expenditure by the central government rose by 15% during the period to Rs6.90 trillion from 6.21 trillion in the year-ago period.

In contrast, the Centre’s fiscal deficit for the corresponding period last year stood at 76.4% of the Budget estimate for the entire 2009-10 financial year.

At Rs1.86 trillion, the fiscal deficit in April- November, 2010, amounted to 48.9% of the Budget estimate of Rs3.81 trillion for the entire 2010-11 financial year, according to data released by the Controller General of Accounts.

The government collected Rs2.96 trillion in taxes during the eight-month period, which was 55.5% of the budgetary target for the entire fiscal.

In comparison, tax collections during the same period last fiscal amounted to just 49.1% of the whole-year target.

Furthermore, non-tax revenue in April-November, 2010, stood at Rs18 trillion, higher than the Budget estimate for the entire fiscal, primarily on account of higher realisation from the auction of spectrum, which raked in approximately Rs70,000 crore more than the government estimated.

The Centre’s fiscal deficit targets went awry after the government provided a stimulus to the economy in the aftermath of the global financial crisis that broke out in 2008.

Among the measures, the government slashed taxes and stepped up public expenditure to spur the growth of the economy.

However, this also led to widening of the fiscal deficit.

As a result, the fiscal deficit doubled to over 6% in 2008-09, as against the maximum permissible limit of 3% stipulated by the Fiscal Responsibility and Budget Management Act.

The deficit rose further to over 6.5% last fiscal.

After the government partially rolled back the stimulus by raising excise duty, the Budget estimates pegged the fiscal deficit at 5.5% of the GDP.

However, despite the higher realisation from the sale of spectrum for high-speed telephony and broadband services, the government expects the fiscal deficit to be contained at the same level as its Budget estimate.
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This post was submitted by Mudit Agrawal.

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