The central government’s fiscal deficit for the first two months of the current financial year (April & May) was 42.9 per cent of the Budget Estimate (BE) for 2016-17, despite slowing of capital expenditure.
In the corresponding period of 2015-16, it was 37.5 per cent of BE for that year. In April, first month of this financial year, it was 25.7 per cent of the year’s budgeted amount, compared to 23 per cent in the same month of 2015. The data was released by the Controller General of Accounts, a day after the Cabinet cleared recommendations of the 7th Pay Commission to pay 23.5 per cent more, on average, for 10 million government employees and pensioners. This will have some impact on the fiscal deficit for this year. The recommendations will reflect in the July salary for employees, to be paid in August.
More specifically, the salary impact would hit the revenue deficit portion of the fiscal deficit. This gap between non-capital expenditure and receipts touched 56.2 per cent of the BE in these first two months; a year before, it was 43.8 per cent.
In absolute terms, the fiscal deficit touched Rs 2.28 lakh crore by end-May, against Rs 2.08 lakh crore in the corresponding period of the previous year. The fiscal deficit for all of 2016-17 has been budgeted at Rs 5.34 lakh crore, about 3.5 per cent of gross domestic product (GDP). The government’s capital expenditure declined almost 12 per cent to Rs 33,231 crore in April-May, against Rs 37,743 crore in the corresponding period of the earlier financial year. On the other hand, revenue expenditure was up 17.6 per cent, to Rs 2.64 lakh crore in these first two months, compared to Rs 2.25 lakh crore earlier. This expenditure will go up due to the Pay Commission’s recommendations.
However, total receipts rose 27.4 per cent to Rs 69,060 crore, against Rs 54,207 crore in the first two months of the previous year. The tax kitty rose to Rs 49,690 crore, more than double the Rs 19,889 crore in the same months of 2015.
Non-debt capital receipts, including disinvestment, yielded only Rs 3,369 crore but was higher by 82.5 per cent, compared to Rs 1,846 crore in the first two months of 2015-16. Disinvestments are supposed to yield total revenue of Rs 56,500 crore this year.
Non-tax revenue was Rs 16,601 lakh crore, almost half of last year’s Rs 32,472 crore. The government’s aim is a fiscal deficit at 3.5 per cent of GDP this year, compared to 3.9 per cent in 2015-16. The revenue deficit is targeted to come down to 2.3 per cent of GDP, against 2.5 per cent in 2015-16.