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Centre’s off-budget liabilities soar to 8% of GDP

The revenue deficit for 2008-09 is now pegged at Rs 247,016 crore; this is 2.4% higher than the revised estimate of Rs 241,273 crore.

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The revised figures for 2008-09, presented in the interim budget for the current year, have proved to be generally underestimates in respect of both receipts and expenditure, resulting in an overshooting of the revenue and fiscal deficits for that year.

The new fiscal too is off to a bad start with the revenue deficit and fiscal deficits for April 2009 at a whopping Rs 50,359 crore and Rs 54,158 crore, respectively.

The revenue deficit for 2008-09 is now pegged at Rs 247,016 crore; this is 2.4% higher than the revised estimate of Rs 241,273 crore.

Likewise, the fiscal deficit, at Rs 330,114 crore — according to what is described as actuals in the official jargon with the qualification that they are unaudited provisional figures — has outrun the revised Rs 326,515 crore by a rather small margin of Rs 3,559 crore, or by 1.1%.

With this revision in these key budgetary numbers as well as the release of updated national income data by the Central Statistical Organisation, it is possible to deduce that the Union finances have suffered a serious setback.

From the revenue deficit of 4.4% of the gross domestic product in the interim budget based on the revised estimate, the revenue deficit has now worsened to 4.6% in terms of actuals; the fiscal deficit is also marked higher by a similar percentage margin at 6.2%.

This is not all. During the last fiscal, the Centre had issued oil bonds worth Rs 75,942 crore and fertiliser bonds to the tune of Rs 20,000 crore, taking the cumulative bond issues to Rs 95,942 crore (1.8% of GDP).

In the event, as compared to the total deficit of 7.8% as per the revised estimate, the actual works out to 8% of the GDP.

In contrast, during 2007-08, these bonds were much smaller in magnitude, at Rs 27,833 crore, constituting a mere 0.6% of that year’s GDP while the total deficit stood at 3.3% of GDP.

A deeper probing reveals that, on the receipts side, during 2008-09, the actual tax garnering was lower by Rs 18,244 crore or 3.9% vis-a-vis the revised number in the interim budget.

But, a bigger setback was seen in the case of non-debt capital receipts, where the divergence between the actual and revised figure was of the order of Rs 5,561 crore, the shortfall being as much as 45%.

In regard to government spending, the revised estimate proved to be on the higher side; the actual spending was short to the extent of Rs 19,484 crore or 2.2%, at Rs 881,469 crore.

Both plan and non-plan expenditure were short of the sum mentioned in the interim budget, and in relative terms, the deviation was greater for plan spending at 2.7%, than non-plan spending at 1.9%.

The financial position of the Centre as of end-April 2009 is now available and it does not make a happy reading.

The revenue deficit at the close of the first month of the fiscal year was a whopping Rs 50,359 crore or 21% of the projected Rs 238,534 crore for the entire year and the fiscal deficit was of the order of Rs 54,158 crore or 16% of the year’s total of Rs 332,835 crore.

Though the April 2009 trends are not reassuring, there is no need for undue alarm either. Normally, this month is a period of slack revenues while the government spending shows no major let-up. Even with this caveat, from the limited data, an inference is possible that all is not well with the fisc.

As of the close of April 2009, tax revenue in relation to the budget estimate for 2009-10 was 1.9%; this is lower than the year ago figure of 2.2%.

On the other hand, total expenditure for the month has accounted for 6.9% of the entire year’s budget which is higher that what it was in April 2008 — 6.2%.

The pattern of spending too gives rise to misgivings, with the proportion up in the case of non-plan expenditure at 7%  compared with 5.7% a year ago, while plan spending has lagged behind at 6.9% of the annual amount budgeted as against 7.1% in the allocation for 2008-09.
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