Fiscal deficit looms in spite of quarterly bulge in tax receipt

The usual quarterly jump in tax receipt in December failed to bring succour to central government finance with the operations during the month necessitating a net borrowing, which pushed cumulative gross fiscal deficit to Rs.5.16 trillion — 95.2 per cent of annual budget indicating a sharp deterioration from 78.8 per cent in the corresponding period of 2012-13 and 92.3 per cent in this period two years ago.

Slowing economy hits tax receipt
A slowing economy hit the fiscal receipt of the government hard. The growth rate in gross tax receipt dropped to 7.2 per cent in December, one-half of the pace a year ago, and in cumulative receipt the growth rate declined to 9.2 per cent from 15 per cent during the first nine months of 2012-13. Corporate tax increased 9.6 per cent (10.6 per cent) till December; personal income tax was up 19.8 per cent (22.5 per cent), customs duty 4.4 per cent (6 per cent); and service tax 19.8 per cent (33 per cent). Indicating the erosion of manufacturing, excise duty collection declined 6.9 per cent during April-December, against 17 per cent rise in the corresponding period in fiscal 2012-13. The y-o-y decline was across all the nine months, barring some increase in September.

As the tax receipt fell much below expectations, the Finance Minister went for squeezing more dividend payouts from PSUs, which lifted non-tax receipt 35 per cent, three times 11 per cent in the first nine months of the fiscal 2012-13. Non-debt capital receipt declined 15 per cent. The growth rate in total non-debt revenue, capital receipt declined from 14 per cent to 10 per cent.

Expenses resist containment
Central government expenditure increased 17.4 per cent, widely surpassing 10.6 per cent during the first nine months of fiscal 2012-13. Plan expenditure rose 18.7 per cent (6.9 per cent and the non-plan expenditure 16.9 per cent (12.2 per cent), both surpassing their respective rates a year ago.

In plan expenditure, Ministry of Civil Aviation spent 98 per cent annual allocation, Ministry of Road Transport and Highways spent 81 per cent, Ministry of Women and Child Development, Ministry of Railways, Ministry of Agriculture and Ministry of Human Resource Development 70-77 per cent, Ministry of Rural Development and Ministry of Urban Development 61-64 per cent, Ministry of Social Justice and Empowerment, Ministry of Drinking Water and Sanitation and Ministry of Health and Family Welfare 50-59 per cent; and Ministry of Home Affairs, Department of Atomic Energy, Ministry of Panchayati Raj and Ministry of Power 40-47 per cent. However, Department of Telecommunications could spend only 35 per cent of budget allocation. Overall plan expenditure was, largely, evenly placed over quarters, barring some ministries like that of Road Transport and Highways and Social Justice and Empowerment.

Deficit shoots up
Fiscal deficit was 27.6 per cent higher cumulatively, against a compressed 6.2 per cent during April-December 2012. In fact, barring August, fiscal deficit has consistently remained higher relative to year-ago levels. By the way, fiscal deficit in the last fiscal had run 17 per cent higher till November, but the last four months of the year had witnessed sharp reduction in growth rates on the back of cutbacks in largely plan expenditure.