Fiscal Deficit (Union government)

Fiscal deficit of the government at Rs. 5.47 trillion in July'19 higher than that in the comparable period of the pervious year.

Published monthly by Controller General of Accounts (CGA), Ministry of Finance, GoI. Updated till July 2019. (Published on August 30, 2019)  

Recent Data Trend

In July'19 the central government's gross fiscal deficit stood at Rs. 5.47 trillion (77.8% of the budgeted estimate (BE) for FY20) lower than Rs. 5.40 trillion (86.5% of BE of FY20) in July'18. Judging from this month's offtake, the lower inflow of receipts at Rs. 3.9 trillion compared to an expenditure incurred of Rs. 9.4 trillion has led to a widening of fiscal deficit. The government is however committed to bringing down its fiscal deficit to 3.3% in FY20, which maybe achievable with the use of transfer of surplus funds from the RBI.  Though slowdown in the economy and lower than expected collection of GST revenue collection can have an impact on fiscal deficit. 

The total expenditure in July'19 stood at Rs. 9.47 trillion (34% of budgeted value), with revenue expenditure accounting for 34.3% of it, slightly lower than the comparable period a year ago. In comparison to last year, the government has made lower level of capital expenditure. In July'19, capital expenditure stood at 31% of the budgeted value compared with last year (37.1%). 

On the revenue front, the net tax revenue collections have been reaching 20% of BE as against 19% in the previous year. Further, the non-tax revenues accruing to the government stood at 14% of BE. Higher collection from corporation tax (Rs.883.8 billion), income tax (Rs. 1287.52 billion) were offset by lower collection from custom duty (Rs.517.19 billion) and excise duty (Rs. 548.44 billion). 

The non-debt capital receipts, which mainly includes disinvestment, has been in line reaching 14% by end-July'19, similar to the progress in the previous year.

We believe, the worries related to fiscal slippage, for now, seems to have reduced given the transfer of Rs. 1.76 trillion made from the RBI to the government. The government will be tempted to spend more as it has already announced a slew of measures to boost confidence in the economy. It will still need to remain cautious of the risks to fiscal slippage as there can be a continued slowdown in the economy and lower than expected tax collections. The government is required to boost consumer confidence, otherwise a perceived cyclical slowdown might turn into a deeply wounded structural slowdown.

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 FY 2019 and FY 2020 represent the budget estimates for the fiscal year April 2018- March 2019 and April 2019- March 2020. 


   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.


For more information please visit the official government website.

Next Release Date: September 30th, 2019