Despite the government's claim that it will not reduce expenditure in the current financial year, the first five months of the government's books of accounts show that expenditure have been slower than the previous year.
Between April and August 2019, the government expenditure stood at Rs 27.86 lakh crore, 42.2 per cent of the budgeted target against 44 per cent in the previous year. It is the capital expenditure - spending on creating infrastructure and other assets - that seems to be victim of the forced frugality of the government.
Capital expenditure during the first five months of the current financial year have been 40 per cent of the budgeted target of Rs 3.38 lakh crore against 44 per cent in the previous financial year. The government seems to have also cut down revenue expenditure - salary and other administrative expenses. Revenue expenses between April and August 2019 have been 42.4 per cent of the budgeted target against 44 per cent in the previous year.
Last week the finance minister had in a press briefing said that the government's capital expenses are on track. The minister had directed secretaries of different ministries to closely monitor the execution of capital works and ensure that payments are released on time to achieve the targeted capital expenditure.
Apart from the budgeted allocation under capital head of Rs 3.38 lakh crore for 2019-20, the total amount given to ministries/departments as Grant in Aid (GIA) for creation of capital assets amounts to Rs 2.07 lakh crore. Thus, the total amount available for Capex in 2019/20 is Rs 5.45 lakh crore.
Total Capex till August under capital head has been reported at Rs 1.36 lakh crore (40.28 per cent) and under GIA, it has been reported at Rs. 0.82 lakh crore (39.7 per cent) totalling Rs 2.18 lakh crore (40 per cent).
Most analysts and economists had predicted that the government may go slow on expenditures, especially capital expenditure, after it announced massive cut in corporate tax rates. The cut in tax rates would cost the exchequer Rs 1.45 lakh crore.
With slowing economic growth, the government is anyway expecting a slower growth in the tax revenue collection. Till August, the gross tax collection was Rs 6.60 lakh crore, a growth of 4 per cent compared to 18 per cent expected growth rate. So far net tax collections have been 24.5 per cent of the budgeted target compared to 24.7 per cent in the previous year.
"The tax revenue collections at 24 per cent of the budgeted target have fairly been in line with the trend of the previous year. Higher receipts through corporation tax, income tax, CGST and customs were offset by lower collections through union excise duties and service tax," says a CARE rating report.
What has come to government's rescue is dividend from the Reserve Bank of India (RBI). Dividends from bank, CPSEs and RBI fall under the non-tax revenue category, and the government has already collected Rs 1.99 lakh crore, or 63.4 per cent of the budgeted target of Rs 3.13 lakh crore. Last year by August, non-tax revenue collection was around 40 per cent of the budgeted target.
It is reported that the government may again ask the RBI to pay it an additional dividend of Rs 30,000 crore, over and above the Rs 90,000 accounted for in the current financial year.
All these measures have so far helped the government keep the fiscal deficit in check. The fiscal deficit until August was 78.7 per cent of the budgeted target of Rs 7.03 lakh crore against 95 per cent in the previous year.