India’s Fiscal Deficit Breaches Full Year Target
The Indian government reached 112 percent of the full-year fiscal deficit target in the April to November period.
The Indian government breached its fiscal deficit target for the current year in the April-November period, showed data released by the Controller General of Accounts on Friday.
Fiscal deficit, or the gap between the government's earnings and spending, reached Rs 6.12 lakh crore. That’s 112 percent of budgeted gap for 2017-18. In the same period last year, the government had exhausted 85.8 percent of the fiscal deficit target.
That data suggests that the government will breach its fiscal deficit target of 3.2 percent of GDP in the current year. To be sure, if revenue collections pick up in the remainder of the year, the government may be in a position to meet the target. While possible, meeting the fiscal target seems unlikely. Earlier this week, the government said it borrow an additional Rs 50,000 crore through dated securities. It will also borrow an additional Rs 23,000 crore through T-bills during the course of the current fiscal. Following the announcement of additional borrowings, economists expect the fiscal gap for the current year to settle between 3.5-3.7 percent of GDP.
Government’s finances have been strained due to volatility in indirect tax revenues after the implementation of the Goods and Services Tax (GST). Data released earlier this week showed the government collected the lowest monthly revenue yet from GST in November, due to lowering of tax rates in the middle of the month.
The data released on Friday showed that the revenue deficit has hit Rs 3.22 lakh crore - 152.2 percent of the budget estimate. In the same period last year, the revenue deficit stood at 98.2 percent of the budget target.
While revenues have been volatile, the government has front-loaded expenditure. Revenue expenditure stood at 70.5 percent in the first eight months of the fiscal year, compared to 66.1 percent last year. Capital expenditure in the April-November period hit 59.5 percent of the budget target compared to 57.7 percent last year.
Fears of fiscal slippage have pushed up government bond yields. The 10-year bond yield has jumped nearly 88 basis points in 2017. The benchmark yield was trading close to 7.35 percent on Friday.
