The centre could be as aggressive as last year in slashing expenditure this fiscal with estimates suggesting a R90,000-crore shortfall in revenue receipts — R70,000 crore in tax receipts and at least Rs 20,000 crore in the disinvestment space.
To meet its budgeted revenue target for FY14, the government needs to ensure that more than 57% of its budgeted tax revenue of R12.36 lakh crore comes in the last five months of the year (November-March). This, according to a senior official, is an uphill — if not impossible — task as the economic slowdown has slowed tax collection growth considerably.
Economists say this year could be worse than last year in terms of the revenue shortfall. While slowing industrial output has hit excise collections, the the sluggish investment scenario has adversely impacted imports of machinery and raw materials, denting customs revenue. Besides, weak corporate profitability has arrested growth in corporate tax, the largest revenue item for the government. the managers of government finances, however, still pin hopes on this revenue stream.
“The revenue shortfall could be bigger than last year. The same holds true for expenditure cuts. We see a 5-6% shortfall in revenue this fiscal. Services is coming down, industrial growth has slowed. Only the agricultural sector looks like it could recover marginally,” said Anis Chakravarty, senior director at Deloitte in India.
The official said the disinvestment target of R54,000 crore (including residual stake sales in HZL and Balco) looks increasingly unachievable. He said the Centre would be able to garner R20,000 crore from PSU disinvestment at the most and, if residual stake sales in HZL and Balco happen, maybe another R14,000 crore. So far, only R3,000 crore has been raised from minor stake sales.
Indian Oil and BHEL stake sales are facing opposition from within the government because of the scrips’ low prices, and Coal India's unions are vehemently opposed to any stake ale in the company. Meanwhile, a residual stake-sale in Hindustan Zinc and Balco to Vedanta Resources, which was supposed to add R15,000 crore to government coffers, is also held up because of differences of opinion between the North Block and the mines ministry.
"There was too much expenditure cushion given in the budget," an official said.
Officials say the government will not breach its FY14 fiscal deficit target of 4.8% of the GDP even if it means cutting expenditure in employment schemes such as MGNREGA and Indira Awas Yojna as there are sums that lie unutilised there. Till October 2013, fiscal deficit had reached 84.4% of budget estimates. The government could roll over some of the expenses to next year and ask for special dividends, but that may not bring in the required funds. Ultimately, the axe will fall on expenditures. The situation is as bad as last year and there is no way to crank up growth beyond 5%," DK Joshi, economist at CRISIL, said.