Centre’s fiscal deficit at 42.9% of BE in first two months of FY17

Centre's fiscal deficit at 42.9% of BE in first two months of FY17

The central government’s fiscal deficit for the first two months of the current financial year (April & May) was 42.9% of the Budget Estimate (BE) for 2016-17, despite slowing of capital expenditure. In the corresponding period of 2015-16, it was 37.5% of BE. In April, first month of this financial year, it was 25.7% of the year’s budgeted amount, compared to 23% in the same month of 2015.

The data comes from the controller general of accounts, a day after the Cabinet cleared recommendations of the 7th Pay Commission to pay 23.5% more, on average, for 10 million government employees and pensioners. This will have some impact on the fiscal deficit for this year. The recommendations will reflect in the July salary for employees, to be paid in August.

More specifically, the salary impact would hit the revenue deficit portion of the fiscal deficit. This gap between non-capital expenditure and receipts touched 56.2% of the BE in these first two months, while a year before, it was 43.8%.

In absolute terms, the fiscal deficit touched Rs 2.28 lakh crore by end-May, against Rs 2.08 lakh crore in the corresponding period of the previous year. The fiscal deficit for all of 2016-17 has been budgeted at Rs 5.34 lakh crore, about 3.5% of gross domestic product (GDP).

The government’s capital expenditure declined almost 12% to Rs 33,231 crore in April-May, against Rs 37,743 crore in the corresponding period of the earlier financial year. On the other hand, revenue expenditure was up 17.6% to Rs 2.64 lakh crore in these two months, compared to Rs 2.25 lakh crore earlier. This expenditure will go up due to the Pay Commission’s recommendations.

However, total receipts rose 27.4% to Rs 69,060 crore against 54,207 crore in the first two months of the previous year. The tax kitty rose to Rs 49,690 crore, more than double the Rs 19,889 crore in the same months of 2015. Non-debt capital receipts, including disinvestment, yielded only Rs 3,369 crore, but was higher by 82.5% compared to Rs 1,846 crore in the first two months of 2015-16. Disinvestments are supposed to yield a total revenue of Rs 56,500 crore this year.

Non-tax revenue was Rs 16,601 lakh crore, almost half of last year’s Rs 32,472 crore. The government’s aim is a fiscal deficit at 3.5% of GDP this year, compared to 3.9% in 2015-16. The revenue deficit is targeted to come down to 2.3% of GDP, against 2.5% in 2015-16.