Showing signs of financial strain, the government's fiscal deficit in the first five months of the ongoing financial year has already touched 74.6 per cent of the budget estimate.
The fiscal deficit, which is the difference between government receipts and spending, touched Rs 4.04 lakh crore in April-August, or 74.6 per cent of the budget estimate. The fiscal deficit reached 65.7 per cent of the budget estimate in the April-August period of 2012-13, government data showed.
The deficit so far is without accounting for a substantial portion of food and oil subsidies, which are likely to exceed budget estimates following the enactment of the Food Security Law and an oil import bill that is shooting up due to an over 21 per cent rupee depreciation in April-August period.
While the government has provided for Rs 90,000 crore (Rs 900 billion) as food subsidy in the Budget, the actual outgo may be close to Rs 1.13 lakh crore. Similarly, the subsidy on diesel and cooking fuel may be double the provision of Rs 20,000 crore (Rs 200 billion).
Net tax receipts for the first five months of the fiscal year touched Rs 1.8 lakh crore, while total expenditure was Rs 6.62 lakh crore. The fiscal deficit during 2012-13 came down to 4.9 per cent of the GDP from 5.8 per cent a year earlier. In the current financial year, the government plans to lower the deficit to 4.8 per cent of the GDP.
"The government will do whatever is necessary to contain the fiscal deficit to 4.8 per cent of GDP this year. The most growth-friendly way to contain the deficit is to spend carefully, especially on subsidies that do not reach the poor, and we will take effective steps to that end," Prime Minister Manmohan Singh had said.
Finance Minister P Chidambaram at many occasions has reiterated that red line has been drawn for the fiscal deficit and they will not be breached.
With aim to stick to fiscal deficit target, the government had announced slew of austerity measures including reduction in non-plan expenditure, ban on holding seminars in five-star hotels and creation of new jobs.
While announcing the steps, the government did not quantify the savings it would make by the expenditure rationalisation that was announced on September 18. The revenue deficit during five months period went up to Rs 3.31 lakh crore, or 87.4 per cent of the budget estimate, compared with 79.2 per cent last year.
Revenue collection slowed down to 20.8 per cent of the budget estimate (Rs 8.84 lakh crore) as against 22.7 per cent in the previous fiscal. Indirect and direct tax collection stood at Rs 1.83 lakh crore at the end of August.