DNA Money Edit: Fresh fiscal challenges for the government

The government may be constrained to shrink capital expenditure in the fourth quarter as we have overshot even the revised estimate (RE) of the fiscal deficit for 2017-18 by around 14%. India's economic growth that has just picked up momentum in the third quarter may be a direct casualty.

To cap fiscal deficit at 3.5% of gross domestic product (GDP), which is the revised target after the government overshot the Budget Estimate (BE) of 3.2%, the government may have to go for a massive cut in expenditure. The government has to constrict expenditure because it has reached 96.9% of the RE against 72.9% a year ago. The government's revenue receipts tend to rise substantially in the last quarter with higher tax inflows and disinvestment flows from the HPCL-ONGC transaction, but the government may face challenges in the form of a drop in dividends and profits, making it an enormous struggle to remain with the revised estimates.

The government deserves kudos for bettering tax revenues to Rs 9,71,323 crore, better than the previous year's figure till January. This is despite the overall GST mop-up dipping in last few months including January. On the receipt side, non-debt capital receipts that include disinvestment and non-tax revenues (spectrum fees and transfer of funds from RBI) have failed to keep up the pace of the previous year.