The government has pegged the fiscal deficit at 4.1 per cent of GDP in the current financial year.
The central government's fiscal deficit reached 74.9 per cent of the Budget Estimate (BE) for the full financial year of 2014-15 in only the first five months, showed official data issued on Tuesday.
The gap between expenditure and receipts totalled Rs 3.98 crore (Rs 39 million) over the April 1-August 31 period against the Rs 5.31 lakh crore(Rs 5.31 trillion) pegged in the Budget for 2014-15.
It is also true that this deficit was 74.6 per cent at this point of time in the previous financial year and the government had managed to rein it at no more than 4.5 per cent of gross domestic product (GDP) against the 4.8 per cent estimated in the Budget.
However, to do so, it had to drastically cut expenditure, particularly the plan one. Plan expenditure, meant to build for the future, was cut by 18.4 per cent compared to the BE in 2013-14.
The government has pegged the fiscal deficit at 4.1 per cent of GDP in the current financial year.
"It is difficult to meet the target," said Devendra Pant, chief economist at India Ratings.
At this point, India Ratings believes the deficit will end at 4.3 per cent of GDP in 2014-15.
However, Madan Sabnavis, chief economist at CARE Ratings, said the government could meet the target if disinvestment proceeds are as planned, industrial growth picks up and so on.
Otherwise, the government will have to cut expenditure, he added. The government was able to contain expenditure in April-August, compared to the same months of the previous year; however, revenue, particularly tax collections, have lagged.
Total receipts for these five months were Rs 2.75 lakh crore (Rs 2.75 trillion), about 21.7 per cent of the target of Rs 12.64 lakh crore (Rs 12.64 trillion)
These accounted for 23 per cent of the BE in the first five months of the previous financial year.
Tax collections (net of states' share) were Rs 1.85 lakh crore, about 19 per cent of the BE, against 20.8 per cent for the same months of 2013-14.
Non-tax revenues were Rs 84,996 crore, two-fifth of the BE at Rs 2.12 lakh crore (Rs 2.12 trillion), a bit more than the 39.9 per cent in April-August 2013-14.
Non-debt capital receipts were only Rs 4,334 crore, about 4.9 per cent of the BE at Rs 73,952 crore (Rs 739.52 trillion).
Most of the portion under this head is to come from disinvestment, none of which has happened till now. Expenditure has roughly kept up with that in 2013-14.
Total spending has been Rs 6.72 lakh crore (Rs 6.72 trillion) in these five months, 37.5 per cent of the BE at Rs 17.94 lakh crore. At this point last year, it was 39.8 per cent.
Non-plan expenditure was Rs 4.95 lakh crore (Rs 4.95 trillion), about 40.6 per cent of the target at the time of the Budget presentation, Rs 12.19 lakh core (Rs 12.19 trillion).
This was lower than the 43.2 per cent at this point in FY14.
Plan expenditure was Rs 1.77 lakh crore (Rs 1.77 trillion), representing 30.9 per cent of the budgeted Rs 5.75 lakh crore (Rs 5.75 trillion).
Proportionately, it was 33 per cent at this point last year.
Last week, the government announced it would borrow Rs 8,000 crore (Rs 80 billion) less in the second half of the current financial year than planned in the Budget.
If so, it is thinking of reining in the fiscal deficit at 4.1 per cent or less. The Reserve Bank transferred Rs 52,679 crore (Rs 526.79 trillion) of surplus to the government for the year ended June.
As such, non-tax revenue is forthcoming.
If disinvestment also proceeds as budgeted and industrial growth gains momentum, leading to higher taxes, the fiscal deficit target could be met without a cut in expenditure.
If not, there would have to be such cuts.
Pant said the disinvestment target of Rs 58,425 crore (Rs 584.25 trillion), coupled with two more advance tax payments by December 15 and March 15, could harden liquidity and one had to see how it went through without disrupting the markets. On the beneficial side for the government, international crude oil prices have been coming down, reducing its subsidy burden.
The government has estimated fuel subsidy at Rs 63,426.95 crore (Rs 634.26 billion) for 2014-15.
For the previous year, too, this was pegged at Rs 65,000 crore (Rs 650 billion) but had to then be revised to Rs 85,480 crore (Rs 854.80 billion).
The Indian basket of crude oil prices was at $95.26 a barrel as on Monday.
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