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'Current fiscal parameters reveal worrisome trend' - Economic Survey - Views on News from Equitymaster
 
 
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  • Mar 1, 2000

    'Current fiscal parameters reveal worrisome trend' - Economic Survey

    Given that the data is for nine months (75%) of the fiscal year, most heads of revenue and expenditure should have been in the vicinity of 75% achievement levels. However, what we see is a wide divergence, in receipts and expenditure.

      April - December YoY change as % of budget
    estimate for FY00
    Rs bn 1998 1999 (%)
    Revenue receipts 997 1,151 15.4 62.9
      Tax
    710 792 11.5 59.8
      Non Tax
    287 359 25.2 71.2
    Capital Receipts 618 752 21.6 74.4
             
    Total Receipts 1,615 1,903 17.8 67.0
             
    Non Plan Expenditure 1,190 1,407 18.2 68.0
      Interest
    447 558 24.8 63.4
      Subsidies
    162 156 (3.7) 69.7
      Pension
    74 106 42.3 104.4
    Capital Expenditure 93 97 5.1 58.8
             
    Plan Expenditure 425 496 16.5 64.4
      Revenue
    264 290 10.1 62.3
      Capital
    162 205 27.0 67.7
             
    Total Expenditure 1,615 1,903 17.8 67.0
      Revenue
    1,361 1,600 17.6 67.5
      Capital
    254 303 19.0 64.5
             
    Revenue Deficit 364 449 23.4 83.0
    Fiscal Deficit 556 671 20.7 89.0
    Primary Deficit 109 113 4.1  

    On the revenue front the government had targeted a 21.5% growth in revenue receipts. However the growth rate achieved is much lower at 15.4%. This is mainly due to the slower than anticipated economic recovery. Capital receipts seem to be in line with budgeted figures. However a closer look reveals that the government had budgeted Rs 100 bn as inflows from disinvestment. So far the collections have been only Rs 13 bn. Receipts from other capital sources too have fared badly. The rise in government borrowings (83% of annual target) has helped bridge the capital receipts gap.

    The expenditure side however presents a different picture. The government seems to have been successful in limiting the growth of expenditure. This is evident from the fact that except for pension, none of the other heads have exceeded even 70% of the budgeted amounts for the year. Infact, if one were to take into account the war in Kargil and the elections, overall expenditure management seems to have been under control. It must however be pointed out that the government had targeted expenditure growth of just 11.3% while the actual growth has been 17.8%.

    The deficit figures as percentage of annual targets clearly bring out the dismal state of economic affairs. It also makes it apparent that the government is likely to exceed the deficit and borrowing targets by significant margin.

    The fiscal plight is evident. Measures such as broadening of the tax base, improving compliance, rationalising expenditure, reducing the size of the government and divesting stakes in public sector enterprises need to be taken without further delay. These moves will help bring about a balance in the budget.

     

     

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