Fiscal deficit touches 76% of full-year target: Government

NEW DELHI: A smart pickup in revenue helped the government keep September’s fiscal deficit at almost the same percentage level it was in August, giving rise to hope that the target for the full fiscal year may be met despite three-fourths of the annual limit having been reached in the first half itself.

Data released on Thursday showed the fiscal deficit at the end of September, halfway through 2013-14, at 76% of the budgeted amount, up from 65.6% at the same time last year but only marginally ahead of 74.6% in August.

Finance minister P Chidambaram has repeatedly said that the fiscal deficit target of 4.8% of gross domestic product in the current fiscal will be met even as the numbers ran up sharply, arguing that revenues are usually back-loaded in the financial year.

The September data supports this, indicating that tax revenue could gather pace, especially as the economy shows some signs of picking up momentum. “We will be able to meet budget target on fiscal deficit,” economic affairs secretary Arvind Mayaram said after the data release.

At the end of September, total revenue stood at 36.9% of the budgeted amount, a striking improvement over 23.9% at the end of August, and almost on par with 37.5% at the same time last year.

Expenditure is broadly in line with estimates so far, indicating that the election year urge to spend seems to be under control as of now. State polls in the next few weeks will lead into the general elections that’s scheduled for next year.

Non-plan spending at the end of the first six months was 51.6% of the budget estimate and plan spending at 42.5%, leaving overall spending at less than 50% at the halfway mark.

The government will need to do more if it has to stay within the budget target, economists said. “If the government divests aggressively and keeps a tight check on expenditure, then it may be able to meet the budget target. They need to cut subsidies to curb expenditure,” said DK Joshi, chief economist at ratings agency Crisil.

Sonal Varma of Nomura said the threat of a rating downgrade will keep the government on its toes. “We are hopeful that the fiscal authorities will stick to their 4.8% fiscal deficit target, as breaching this would increase the likelihood of a sovereign credit rating downgrade,” Varma wrote in a note after the Reserve Bank of India’s monetary policy on October 29.