Fiscal Deficit (Union government)

India's fiscal balance in meeting the target continues to breach down in Nov'18.

Published monthly by Controller General of Accounts (CGA), Ministry of Finance, GoI. Updated to the month of November 2018. (Published on December 27, 2018)

Recent Data Trend

Centre's gross fiscal deficit reached 114.8% of its revised budgeted estimate (BE) of Rs.6.2 trillion, during Apr'18-Nov'18. This was equivalent to Rs.7.1 trillion (3.8% of GDP). The amount of fiscal deficit has increased by 17.08% YoY compared to the corresponding period last year. With elections around the corner, it is highly likely that the government will miss the target of 3.3% for the fiscal year unless it lowers the spending in the last quarter.

The rising fiscal deficit in 2018 can be attributed to various factors including higher capital expenditure, weak non-tax revenue collections as well as underperformance of goods and services tax collections accruing to the centre.

The collections from revenue receipts at 50.4% of the BE was lower than 53.1% in Nov'17. The lower revenue receipts in Nov'18 can be attributed to lower tax revenue collections that stood at 49.4% of the BE compared to 57% of the BE in Nov'17. Even the non-debt capital receipts of the government declined significantly to Rs.2.6 trillion (28.5% of the BE) from Rs.6.1 trillion(73.25% of the BE) in Nov'17.

In terms of expenditure, the total expenditure reached Rs.16.1 trillion (66.05% of budgeted value) during Apr-Nov'18. Although the government incurred lower revenue expenditure, there was however higher capital expenditure at around 64% of the budgeted value in Nov'18. Though the increase in capital expenditure is viewed as positive for sustainable growth recovery, a continuation of expenditure when revenue receipts are increasing at a slow pace should be seen as a sign of higher fiscal slippage. During Apr-Nov'18, the total expenditure stood at Rs.16.1 trillion.

At this stage, meeting a fiscal target of 3.3% for the fiscal year will depend on the ability of the government to raise a higher GST collection which has so far been lower than the target, and if it can manage to realize the disinvestment target of Rs. 0.8 trillion at the end of the last quarter. Adding to this, if the RBI in the near future decides to provide an interim dividend or it's surplus to the government it will provide some relief on the revenue side.

Brief Overview

The central government accounts are divided mainly into two parts- Revenue Account and Capital Account. The revenue account consists of revenue receipts and revenue expenditure. Revenue receipts are accumulated from tax revenues (both via direct and indirect taxes) and non-tax revenues (interest payments dividend & profits etc.), while the revenue expenditure is broadly the expenditure which doesn't result in the creation of assets (administrative expenses of government, interest charges on debt incurred, subsidies etc.)

Similarly, the capital account consists of capital payments and capital expenditure. The capital receipts mainly include recoveries of loans & advances and earnings from disinvestment while the capital expenditure is the expenditure on acquisition of buildings, lands, and investments in bonds, shares etc.

The excess of expenditure over receipts (on both accounts) gives the fiscal health measure of the government known as the gross fiscal deficit (GFD). Another important gauge of fiscal operations is the revenue deficit (excess of expenditures over receipts in the revenue account). The increase in revenue deficit generally implies that the government is increasingly using its finances to fund its recurring non-productive expenses and no actual asset creation is taking place. To discipline the government in its financial management, the Fiscal responsibility, and Budget Management (FRBM) Act was brought in during the UPA regime in 2003. This act aimed at bringing fiscal discipline by reducing India's fiscal deficit (5.7% of GDP in 2003) to 3% of GDP and elimination of revenue deficit by March 2008. (Revenue deficit stood at 2% of GDP or fiscal year 2016-17)

Government Accounts- Annual

Note: The years represent the fiscal years so 2017 denotes FY 2017 (April 2016-March 2017). The share of GDP for deficits has been calculated using GDP (2004-05=100). The values for 2018 represent the budget estimates for the fiscal year April 2017- March 2018. 


   Revenue Receipts The earnings made by the government which neither create liabilities or reduce assets of the government. For example, receipts from tax collections, interest on investments, dividend earnings and earnings from services provided.
   Capital Receipts The earnings made by the government which creates liabilities (borrowing from the public in form of PPF and small saving deposits, National Pension Scheme etc. ) or reduce assets (divesting stake in a particular company, called disinvestment or recovering loans made to state governments.)
   Non-debt Capital Receipts These are capital receipts which do not create debt for the government such as recovery of loans made and selling a stake in a public company.
   Revenue expenditure It is the expenditure made by the government on a recurring basis such as administrative expenses, interest payments on loan taken by the government, pensions, subsidies etc.
   Capital expenditure It is a productive, asset-creating (or liability reducing) long-period, non-recurring expenditure of the government. For example; expenditure on creating the infrastructure (roads, electricity dams etc.), loans made to state governments and repayment of loans by the central government (reducing liability).
   Gross Fiscal Deficit The fiscal deficit of the government is the difference between the total expenditure incurred and the total non-debt capital receipts (total receipts minus the earnings from borrowing) of the government. It indicates the total borrowing requirements (incl. the need for interest payments) of the government.
   Revenue Deficit It is the difference between the revenue receipts and the revenue expenditure of the central government. Revenue deficit indicates the excess amount of expenditure by the government to fund current consumption needs rather than for productive asset-creation.
   Gross Primary Deficit It is the difference between the fiscal deficit of the current year and the interest payments on the previous borrowings made by the government. It indicates how much of the government borrowing is going to meet expenses other than interest payments.


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Next Release Date: January 28th, 2019