States running high fiscal deficits, too

The central government’s fiscal deficit reached 112 per cent of the budget estimate in the first nine months of the current fiscal, the highest in 19 years due to weak tax receipts. Also, the fiscal picture for the 19 states, which accounted for 90 per cent of the total state budget is not very encouraging either. According to data compiled by Motilal Oswal, their fiscal deficit was 62.5 per cent of their budget estimates, the worst in eight years. These states on an average had a fiscal deficit of 44.3 per cent of the budget estimates in the past five fiscals.

There is a wide divergence in the fiscal deficit of the individual states. Bihar’s fiscal deficit was 5.5 times the full-year budget estimate in the nine months of FY19 as the tax collection was just 20 per cent of the budget estimate and 37 per cent lower compared with the corresponding period of the previous fiscal while revenue and capital spending rose by 39 per cent and 40 per cent, respectively.

The fiscal deficit of Kerala, Rajasthan, and Madhya Pradesh have surpassed their full-year budget estimate target. On the other hand, Maharashtra had a budget surplus of 25 per cent of the budget estimate in the first nine months of FY19. The spending of the state governments remains elevated. The total expenditure of 19 states rose by 14.5 per cent for the first nine months of FY19. The higher spending was mainly due to capital spending which rose by 23.1 per cent in the first nine months of FY19.