October 03 2017

Government Accounts of India

During April-August 2017, the centre exhausted more than 95% of its budgeted fiscal space of Rs.5.46 trillion for FY 2017-18.

Published monthly by Controller General of Accounts (CGA), Ministry of Finance, GoI. Updated to the month of August 2017. (Published on September 29, 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 deficit for the month of August 2017 stood at Rs.201.5 billion, lower than Rs.632.1 billion in the previous month. The government incurred an expenditure of Rs.1.42 trillion in August 2017, lower than Rs.1.57 trillion in July. This marked the fourth consecutive decline in the government expenditure in the current fiscal year (April 2017-March 2018). The total receipts of the government saw a marginal uptick in August to Rs.1.2 trillion from Rs.944.8 billion in July 2017.

The noteworthy point is that the expenditure incurred was mainly on the revenue account amounting to Rs.1.27 trillion in August while the capital expenditure was a mere Rs.145.2 billion. The gross direct tax collections (Corporate tax and Income tax) stood at Rs.250.2 billion whereas the gross indirect tax collections(including customs duties, excise duties, and service tax)amounted to Rs. 107.3 billion in August a sharp fall from Rs.795.7 billion worth of collections in July 2017.

On a cumulative basis, during April-August 2017, the fiscal deficit rose to Rs.5.25 trillion reaching slightly above 95% of the budgeted fiscal space (Rs.5.46 trillion) mainly due to excessive front-loading of expenditure by various government departments, mainly on the revenue account. During the same period last year, the gross fiscal deficit stood at 76.4% of the budget estimate of 2016-17. The government revenue receipts improved to Rs.4.1 trillion during April-August 2017 reaching 27% of the budgeted target (Rs.15.15 trillion). Similarly, non-debt capital receipts also witnessed an improvement compared to the last year completing 18.4% of the budgeted estimate (Rs.844.3 billion) during April-August 2017 as against 12.7% of the budgeted estimate of the corresponding period last year. Total expenditure stood at Rs.9.5 trillion by end-August 2017 exhausting 44.3% of the budget estimate (Rs.21.46 trillion).

The government aims to bring down its fiscal deficit to 3.2% of GDP by end of this fiscal year (2017-18). Last year, the government had met its fiscal deficit target of 3.5% of GDP. The government had advanced the budget presentation by a month to February 1st, 2017 and completed the process before the commencement of the current financial year (2017-18), to encourage ministries to go ahead with their expenditure proposals from the very first month of the fiscal year, i.e. April.

With government exhausting more than 95% of its fiscal space in the first five months of the current fiscal year, it will be tough for the government to meet its fiscal deficit target of 3.2% of GDP for 2017-18. Further, with the economy slowing down to a 3-year low Real GDP growth of 5.7% YoY in April-June 2017, the government needs to provide a fiscal stimulus to revive the economy. It would be a challenging task for the government to adhere to its target as well as provide a fiscal stimulus package to revive the economic growth of India.

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: October 31st, 2017