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Low revenue, high expenditure breaches fiscal deficit target at November-end

New Delhi, Dec 30 (Agencies)
Published on 30 Dec. 2017 9:42 PM IST
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The government breached the fiscal deficit target for the current fiscal year ending March as data showed on Friday the deficit was 112 per cent of the 2017-18 Budget estimate at the end of November, posing a challenge for policymakers grappling to stick to fiscal discipline.
While the government has front-loaded expenditure this year as the Budget passage and clearance was advanced, what has added to the worries is a mild dip in revenue. 
Data released by the Controller General of Accounts showed that net revenue dropped from Rs 1,14,396 crore in November 2016 compared to Rs 1,13,890 crore November 2017.
The deficit in absolute terms was Rs 6.12 lakh crore during April-November. In the year-ago period, the deficit was 85.8 per cent of the full year estimate, official data showed. 
The government had signalled a fiscal slippage when it unveiled an additional market borrowing of Rs 50,000 crore for the current financial year on Wednesday. This was sharply higher than market expectations and has stoked fiscal worries.
The latest figures will make it tough for the government to rein in the deficit at 3.2 per cent of GDP, the target for the current fiscal year. The reasons for the widening deficit are sluggish revenues and front-loading of expenditure due to early presentation of the Budget. The government will also have to rework its fiscal math to meet the target of 3 per cent of GDP by 2018-19.
“Taken together, the fiscal deficit at 112 per cent of the FY2018 BE up to November 2017, the disappointing GST collections for November 2017 and the recent increase in the government’s issuance calendar, signal a fiscal slippage in FY2018,” said Aditi Nayar, principal economist at ratings agency ICRA.
“The magnitude of the fiscal slippage in FY2018 would be governed by factors such as whether GST collections record an uptick in Q4 FY2018, in a manner similar to the seasonal pickup that used to be displayed by excise duty and service tax, and benefiting from improved compliance after the introduction of the e-way bill,” she added.
Latest data showed receipts from GST dipped to Rs 80,808 crore in November, lowest since its introduction in July. The slowdown was largely attributed to the sharp cut in rates for over 200 items. The sluggish economy may also result in a shortfall in corporation tax.
The data showed revenue receipts totalled Rs 8.04 lakh crore at the end of November, or 53.1 per cent of the 2017-18 budget estimate of Rs 15.15 lakh crore. Total expenditure at the end of November was Rs 14.78 lakh crore, or 68.9 per cent cent of the budget estimate. During the same period last year it was 65 per cent.
But there may a silver lining for the government as revenues from disinvestment are expected to be robust. For the first time the government is likely to exceed the target of raising Rs 72,500 crore in the current fiscal year. Experts also rule out any sharp squeeze in expenditure as the government is keen to push public spending to shield growth.

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