Fiscal deficit widens as capital spending, subsidy spending rises in first five months | Today’s news

New Delhi: India’s fiscal deficit – the gap between government expenditure and revenue – widened in the first five months of this financial year (FY27) as capital expenditure and spending on large subsidies such as food and fertilizers rose.

According to the latest monthly accounts released by the Comptroller General of Accounts (CGA) on Wednesday, the fiscal deficit stood at ₹7.10 trillion or 41.9% of the full-year budget estimate during April-August of FY27.

This deficit was 38.1% of the annual target in the same period of the previous year. At the end of July, it was 26.8% of the annual target.

The center has a budget deficit of ₹16.96 trillion or 4.3% of GDP in FY27. It is counting on robust tax collection and higher non-tax revenue in the coming months to meet this target.

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A fiscal deficit is usually financed through borrowing.

The widening fiscal gap takes on significance in August as the government nearly cut its market borrowing for FY27 ₹1.2 trillion and now plans to increase ₹7.86 trillion dated government securities in the second half of the fiscal year.

The center now expects to borrow ₹15.995 trillion through dated securities during FY27 compared to ₹17.2 trillion is estimated in the Union Budget, according to the finance ministry’s borrowing plan released in consultation with the Reserve Bank of India (RBI) on September 25.

Capex push

The latest data showed that the fiscal deficit widened in the first five months of the 02/27/2010 fiscal year as government spending continued to rise, particularly on capital spending.

Achieved total expenditure ₹20.78 trillion by August, equivalent to 38.9% of the full-year budget estimate, while total revenue was ₹13.68 trillion, or 37.5% of the annual estimate. These receipts include ₹8.38 trillion in tax revenue (net to the centre), ₹4.55 trillion in non-tax revenue and ₹75,239 crore under non-debt capital receipts.

In percentage terms, revenues as of August amounted to 36.6% of the estimated budget. Net tax revenue was 29.2% of the estimated annual budget ₹28.67 trillion, while non-tax revenue accounted for 68.2% of it ₹6.66 trillion budget for the year.

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According to the data, the center also received ₹75,239 trillion through non-debt capital receipts, incl ₹13,091 crore in loan recovery and ₹62,148 crore under other income. Non-debt capital income was 63.5%. ₹Budget estimate 1.18 trillion.

The government had a budget ₹36.52 trillion in total income for FY27, including income and non-debt capital income.

Investment is moving roughly in line with the trajectory of the fiscal deficit as government capital spending has reached higher levels ₹5.10 trillion, or 41.7% of the full-year budget estimate ₹12.22 trillion at the end of August compared to 38.5% in the year-ago period. This suggests that the Center has already realized a substantial part of its planned capital expenditure in the first five months, rather than the fiscal deterioration being driven solely by revenue expenditure.

Loans disbursed in the given period remained at ₹1.39 trillion or 50% of it ₹2.79 trillion budget estimate for FY27.

Interest payments amounted to ₹5.15 trillion, representing 36.7% ₹14.04 trillion budgeted for FY27. The corresponding figure a year earlier was 41.4% of the annual allocation.

Subsidy expenses

Spending on large subsidies remained at ₹1.87 trillion during April-August, or 46% of that ₹4.11 trillion budgeted for FY27. This was higher than the 39% utilization recorded in the same period of the previous year.

Urea Subsidy Expenditure Achieved ₹77,522 crore, or 66% of it ₹1.17 trillion full-year allocation compared to 51% utilization in the same period last year.

Meanwhile, spending under the nutrient-based fertilizer subsidy remained flat ₹25,617 crore which is 47% of it ₹54,000 crore annually allocated compared to 51% a year earlier.

Expenditure on food subsidies remained the same ₹83,510 crores, or 37% of it ₹2.28 trillion budget allocation compared to 32% utilization in the corresponding period of the previous year.

Oil subsidy expenditures were ₹388 million, or 3% of that ₹12,085 crore annual allocation.

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The center’s income deficit was at par ₹2.76 trillion by August, equivalent to 46.5% ₹5.92 trillion budget estimate for the entire year. The corresponding value was 37.9% of the annual target in the previous year.

The data shows that the center financed the fiscal deficit mainly from domestic sources.

Domestic financing remained flat ₹7.06 trillion by August, equivalent to 42% of the full-year requirement.

Funding through securities against small savings remained flat ₹1.12 trillion, or 29% of the annual estimate.

The National Petty Savings Fund contributed ₹1.23 trillion during the period, while savings deposits and certificates represented ₹1.96 trillion.

The total financing of the deficit amounted to ₹7.10 trillion, which is equivalent to the fiscal deficit shown in the government accounts.