Eight months into the financial year, the Centre’s fiscal deficit has already overshot the full year’s budget estimate by as much as ₹92,349 crore. And given last year’s fiscal slippage — the deficit in the revised estimates for 2017-18 was 3.5% of GDP, wider than the 3.2% originally targeted — the augury is far from reassuring. While total expenditure growth, at 9.1% so far this year, has remained below the budget projection for a 10.1% increase, worryingly growth-inducing capital spending is set on an underwhelming trajectory. The 4% increase over the eight-month period is less than half the 9.9% growth the Centre had budgeted for the year. However, it is the trends in revenue that give cause for disquiet. In his annual budget presented in February, Finance Minister Arun Jaitley had projected revenue receipts to show a healthy 14.6% increase from the revised estimates for the preceding year, on the back of a 16.6% jump in net tax revenue. Granting that tax revenue does tend to bunch up and get skewed with an upward bias into the final quarter, the April-November revenue receipts and net tax revenue growth numbers, at 8.1% and 4.6% respectively, are far from reassuring. If there is a silver lining on the revenue front, it is the buoyancy seen in non-tax revenue, which surged more than 31%, putting the government comfortably on track to meet the budget estimate for a 3.9% increase. Still, non-tax revenue is budgeted to account for just over a seventh of total revenue and it is hard to see it helping bridge anything more than the smallest of shortfalls in tax receipts.
There is another factor to contend with in sizing up the fiscal calculus this year. With the general election only a few months away, the government needs to avoid the temptation to open the spigot with an eye on the political benefits that it may see accruing. Some of the expenditure plans it has committed to recently have either been factored in or will at most impact the margins — be it public sector bank recapitalisation or an increase in the quantum of incentives for the export of onions to reverse the slide in prices. But the bigger challenge remains in finding ways to rustle up the requisite revenue to keep the deficit from slipping for a second year running. The seven public sector enterprises that have been cleared by the Cabinet for share sales as part of the disinvestment programme are, at best, only likely to partly help meet the budgeted non-debt capital receipts target of ₹92,199 crore. As the Reserve Bank never tires of cautioning, the onus is on the government to avoid further fiscal slippage as it could hurt the economy by crowding out vital private investment. This at a time when it has just been showing signs of a revival.