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Q1 Fiscal Deficit at 68.7% of 2018-19 Budgeted Target

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Improvement over 80.8% in year-ago period even as concerns rise that govt may not be able to meet target of 3.3% of GDP
India’s fiscal deficit at the end of the first quarter of the current financial year was 68.7% of the budgeted target for 2018-19, better than 80.8% a year ago. The data comes amid growing concern that the government may not be able to meet the target of 3.3% of GDP, with the recent cuts in goods and services tax (GST) causing revenue loss while the national health protection scheme and the minimum support prices (MSP) to farmers could add to spending.
“Notwithstanding the mild improvement in the fiscal deficit in Q1 FY19 relative to the year-ago level, various fiscal concerns persist, including whether the budgeted targets for GST revenues, dividends and profits and disinvestment would be realised, and whether the outlays required for revised MSPs, the national health protection scheme, fuel and other subsidies, and bank recapitalisation would prove to be adequate,” said Aditi Nayar, principal economist at ICRA. Last month, the GST Council had approved further rationalisation of the tax regime, moving more items from the 28% slab to 18%.
International ratings agency Moody’s pegged revenue loss from the tax cuts at 0.04%-0.08% of GDP annually, calling the cuts credit negative. “Although the proportion of revenue loss is small, the vacillation in tax rates creates uncertainty around government revenue and comes amid persistent upside risks to its expenditures,” Moody’s said in a note on Monday. Driven by a sharp rise in indirect tax collections in April-June 2018, gross tax revenues were up 22% in the quarter to June while net tax revenues rose faster at 34%. There was a modest growth in direct tax as corporate tax collections were lower in the quarter compared with the year-ago figure.
Non-tax revenues were up 39.1% from that a year ago. The lower 6.6% growth in revenue spending allowed the government to rein in fiscal deficit even as capital spending grew at a brisk pace. Capital spending was up 27% in the quarter from a year ago, with roads and railways being the key spenders. Both revenue and capital spending were 29% of their respective budget estimates, with the former higher than last year while the latter being lower at the same point. Disinvestment receipts during the quarter were Rs.8,760 crore against Rs.7,690 crore a year ago.
The Economic Times, 1st August 2018, New Delhi

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