Is the govt fudging data on revised budget estimates?

With the release of the data on the Union finances till February 2011, the revised estimates for the last fiscal year appear to be suspect.

For these estimates to hold, the Centre had to embark upon a massive spending spree during March, amounting to `237,871 crore, or 20%, of that year’s total.

However, revenue stream would be augmented by only `111,961 crore or 14% of the annual total, so that more than 25% of the revenue deficit and more than 31% of the fiscal deficit for 2010-11 might have been incurred during the single month of March alone.

By any reckoning, this is substantial.

The financing of this order of fiscal deficit too must have been an onerous exercise as, during this month, foreign aid to the tune of only `5,652 crore  might be available, the rest — `16,612 crore out of the revised figure of `22,264 crore — being availed of during the first eleven months of the last financial year.

From among the domestic sources of finance, market borrowings
to the tune of only `25,641 crore were left to be tapped, the balance (`319,773 crore out of the projected `345,414 crore) having been already utilised.    Turn to Page 10

Drawdown of cash balances to the extent of around Rs9,500 crore was provided for in the budget. Hence, reliance on other conventional sources on a limited scale and on disinvestment of surplus cash to a large extent - which was not envisaged in the budget at all and which came to the rescue of the exchequer by contributing as much as Rs31,819 crore during the April 2010-February 2011 period - might have become inevitable.
In all, during March, domestic funds aggregating to a staggering Rs1,202,258 crore were needed to meet the burgeoning expenditure during that month.

All this raises a troubling question. Why did the Centre fail to stagger the expenditure throughout the year? As per the guidelines in force, the rush of expenditure towards the end of the financial year has to be avoided and this was cited as a major area of concern. More specifically, not more than one-third (33%) of the budget estimates should be spent in the last quarter of the financial year, while a ceiling of 15% is set for expenditure during March.

As we have seen, during the final month of 2010-11 as much as
19.6% of the revised estimate of expenditure was undertaken; as a proportion of the budget estimate (Rs 1,108,749 crore ) this ratio works out even higher at 21.5%. The overshooting of the spending target was bad enough; this has been made worse by this bunching of expenditure.

The quality of spending is also troubling in that, a relatively larger share of plan expenditure - 21.4% of the total for the year - remained to be utilised during March 2011. That is, more than a fifth of the plan expenditure slated for 2010-11 had to be done in the last month.

Seen in perspective, the fiscal situation in 2010-11 was quite messy despite buoyant revenues both from the tax front and from non- tax sources including the rich haul from the spectrum auctions. This is borne out by the figures released by the government. Till February, the tax receipts approximated to 85.5% of the year’s revised estimates as against 79.5% during the comparable period of 2009-10, while total receipts constituted 86.3% of the revised projection compared with 78.6% in the preceding year.

But, with the government going slow in its expenditure, both the revenue and fiscal deficits till February 2011, at 74.4% and 68.6% of the respective year’s aggregates, were much better than the corresponding figures of 96% and 92% in 2009-10. That this is entirely due to expenditure compression is clear from the inferred data for March from the information available in the public domain.