Fiscal Deficit (Union government)

India's fiscal deficit widens in February making fiscal consolidation a challenging task.

Published monthly by Controller General of Accounts (CGA), Ministry of Finance, GoI. Updated to the month of February 2019. (Published on March 29, 2019)  

Recent Data Trend

Centre's gross fiscal deficit reached 136.3% of its revised budgeted estimate (BE) of Rs. 6.2 trillion, during April-February. This is equivalent to Rs. 8.5 trillion (4.5% of GDP). The amount of fiscal deficit is the highest in the last decade. With just one month left in the fiscal year, the picture remains clear that the pressure for the government to meet the fiscal deficit target of 3.4% of GDP for 2018-19 continues to mount. If the government misses the target, inflationary consequences are likely in the near-term. There has been a continuous pressure from tax collections. The government has also been trying to close some of their disinvestment deals.

In terms of expenditure, the total expenditure stood at Rs. 21.8 trillion (89.61% of budgeted value) in February 2019, with capital expenditure accounting for 86.6% of the 2018-19 target. In comparison to last year, the government has made a lower level of capital expenditure. In February 2018, capital expenditure stood at 108.9% of the budgeted value of Rs. 3 trillion. The revenue expenditure was at 89.4% of the full year budget at the end of February.

The GST collections dipped to Rs. 9.7 trillion during April- February, after crossing the Rs. 1.02 trillion in January. The non-tax revenue touched 70% of the revised budget estimates compared with 60.2% last year. Tax-revenue collections touched 73.8% of the target (Rs.10.4 trillion) compared to 82% of the budgeted target last year.

Given unhealthy performance on the revenue side and a lower level of capital expenditure, despite an increase in the GDP numbers to Rs. 190.54 trillion (second revised estimate by the Central Statistical Office) from Rs. 188.4 trillion, it will be difficult for the government to meet the fiscal deficit target of 3.4% in 2018-19. However, the increase in the disinvestment receipts in 2018-19 (Rs. 85 billion) can provide some buffer for the government. 

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: To be decided.