Government Accounts of India

Government exhausts 96% of the budgeted fiscal space as fiscal deficit reaches Rs.5.25 trillion during April-October 2017.

Published monthly by Controller General of Accounts (CGA), Ministry of Finance, GoI. Updated to the month of October 2017. (Published on November 30, 2017)

Note The values in Rs.Billion is on month-on-month (MoM) basis and not a cumulative sum over the fiscal year.

Recent Data Trend

India's gross fiscal balance stood at a deficit of Rs.263.8 billion, in contrast to the surplus of Rs.261.1 billion. Total receipts recorded a sharp fall to Rs.1.17 trillion in October a 3-month low from a peak of 2.25 trillion in the previous month. Total expenditure also fell, but by a lesser margin to Rs.1.43 trillion from 1.99 trillion in the previous month.

Both capital and revenue account expenditure recorded a fall in October, following a rise in the previous month. However, the concerning point is that revenue account expenditure (recurring, generally unproductive expenditure) still accounted for 88.6% share in the total expenditure, while capital expenditure had a meager 11.4% share.

On a cumulative basis, during April-October 2017, the fiscal deficit reached Rs. 5.25 trillion (95% of the budgeted fiscal space of Rs.5.46 trillion). The government had reached the 95% of the budgeted fiscal space in the first five months of the FY 2017-18 which got reduced due to the fiscal surplus generated in the month of September on account of higher revenues, owing to the advance tax payments. In the same period, the total expenditure (Rs.12.9 trillion)reached 60.2% of the budgeted value, while the revenue receipts in the same period reached Rs.7.29 trillion (48.1% of budget estimates) as against the 50.7% of budget estimates of 2016-17.

The high fiscal deficit being run by the government mainly owes to the excessive front-loading of expenditure by various government departments, mainly on the revenue account. During the same period (April-October) last year, the gross fiscal deficit stood at 79.3% of the budget estimate of 2016-17.

Recently, the government has approved the capital infusion plan of worth Rs.2.11 trillion for Public Sector Banks (PSBs) in order to revive credit growth and job creation in the economy. The funding pattern for the plan would be front-loaded with major capital mobilization in the current year. The government would issue recapitalization bonds worth Rs.1.35 trillion, which would entail an interest cost of about Rs.80-90 billion for the government.

Another welcome move by the government was a capital expenditure plan worth Rs.6.9 trillion for building national highways by 2022. All such heavy expenditure plans may disturb the fiscal math of the government quite a bit and it may have to recalibrate its fiscal deficit target of 3.2% of GDP for 2017-18.

In trying to stick to its fiscal deficit target, the government may have to lower its expenditure to cover for revenue shortfalls. However, the need of the hour may push the government to provide a fiscal stimulus in order to revive the economic growth which recovered slightly to 6.3% YoY in July-September 2017, after plummetting to a 13-quarter low of 5.7% YoY growth during April-June 2017.

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 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. 

                                        Glossary

 
   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 1st, 2018