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Central government's first quarter scorecard - Views on News from Equitymaster
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  • Aug 1, 2000

    Central government's first quarter scorecard

    The first quarter of fiscal FY01 has been quite dramatic. There has been a scare of drought, turnaround in exports, stagnation in investment activity, surge in oil prices and not to mention a relatively peaceful summer for our fighters in the Kashmir valley. The government of India's finances too, during this period, is dramatic (atleast in some ways!).

    (Rs bn) Budgeted Actuals Actuals as %
    of budgeted
    Actuals as % of
    budgeted (FY00)
    Revenue Receipts 2,036.7 303.5 14.9% 13.1%
    Non debt capital receipts 235.4 16.6 7.1% 5.6%
    Total Receipts 2,272.1 320.1 14.1% 12.3%
    Non Plan expenditure 2,503.9 383.7 15.3% 21.2%
    Plan expenditure 881.0 187.1 21.2% 19.2%
    Total expenditure 3,384.9 570.8 16.9% 20.7%
    Fiscal Deficit 1,112.8 250.7 22.5% 41.9%
    Revenue Deficit 774.3 164.1 21.2% 45.8%
    Primary Deficit 100.1 108.3 108.2% -201.2%

    What is fiscal prudence? Spending within your limits? If thatís the criteria we apply then the Indian government would fail miserably. Keynes too would not be very pleased with this definition, as he was a proponent of pump priming (running up deficits if the need arises) the economy in case of a slowdown. Therefore, a government that manages its resources well (even if a part of the resources is newly created money) is said to be prudent. And the Indian government in the first quarter seems to have taken its first step in that direction.

    Consider this. In the first quarter, the government was able to collect more revenue (expressed as a percentage of the budgeted figure) this year as compared to previous year. More so, its expenditures on the same scale were lower. Although this may be due to the more pragmatic projections of the finance minister, it nevertheless contributes to a greater degree of fiscal prudence. Dig a little deeper and the situation looks still better.

    In 1QFY00, non-plan expenditure (expressed as a percentage of the budgeted figure) was growing more rapidly as compared to plan expenditure. This year the trend has been reversed with a focus on plan expenditure. Just to put our bias in favour of plan expenditure in perspective, non-plan expenditure includes interest costs, administrative costs, subsidies and defence expenditure (we are sure you get the picture!).

    The bottomline figure, the fiscal deficit, at 23% of the projected deficit, too has been contained. The corresponding figures last year stood at 42%! Although this is an achievement in itself, it does not imply that annual targets will be achieved. This is due to the fact that the first quarter is a part of the slack season. Income, expenditure and deficits tend to rise towards the latter half of the year. The revenue deficit too has shown a sharp decline. There has however been a sharp increase in the primary deficit. This is largely due to a faster growth in plan expenditure as against non-plan expenditure.

    All in all the financial performance of the government is creditable in view of the demands of a coalition government and history, which is saturated with examples of public largess by politicians looking at fulfilling ulterior motives.



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