India’s fiscal deficit scaled Rs 4.1 lakh crore in the first half of the fiscal, accounting for 76% of the full-year target of Rs 5.4 lakh crore, due to a sharp shortfall in revenue collection and failure to sell state holdings in public sector enterprises as originally planned. Fiscal deficit in the April-September period of the fiscal is 22% wider than the gap between the government's receipts and spending recorded in the same period a year ago.
In April-September, the government could collect only 35% of the Rs 8.8 lakh crore in net tax revenues it had intended to collect in the whole year.
On the other hand, total expenditure in the first half itself inched up to R8 lakh crore — nearly half of the budgeted full-year target.
Collection of corporate tax, personal income tax, excise duty and service tax in the first half of the year remained within 30-40% of their full-year targets. Customs duty collection, however, reached 44% of the full- year target, mainly on account of the depreciation in the value of the domestic currency. The persistent slow growth in the mining and manufacturing sectors contributed to the lower-than-expected tax receipts.
Economic affairs secretary Arvind Mayaram, however, said that the government will meet the fiscal deficit target of 4.8% of GDP this year. The government hopes that revenue collection in the second half could be better than the first, going by past trend.
What added to the shortfall in revenues is the meagre 11% realisation of R7,058 crore of the targeted R66,486 crore of non-debt capital receipts, which included a planned sale of holdings in companies to raise R40,000 crore.
The finance minister had reiterated that the fiscal deficit target for the current year will not be breached. The government last month announced austerity measures, including reduction in non-plan expenditure and a ban on holding seminars in five-star hotels and on creation of new jobs. These measures, FE had reported earlier, entailed savings of R50,000 crore. But it seems that to achieve the fiscal deficit target, the government will finally have to clamp down on Plan expenditure, as it did last year.