Fiscal deficit crosses 74.6% of annual budget limit in April-August

India's fiscal deficit in the first five months (April-August) of the current financial year crossed 74.6 per cent of the annual projection, compared with 65.7-per cent a year ago, according to data released by the Controller General of Accounts.

Fiscal deficit for the April-August period stood at 4,05,000 crore, against the budgeted figure of Rs5,34,000 crore for the whole financial year (April 2013-March 2014).

The government could contain fiscal deficit at 65.7 per cent of the annual ceiling (and 5.1 per cent of GDP) during the same period last fiscal.

The government was able to rein in the deficit at 4.9 per cent of GDP in 2012-13, largely due to a heavy dose of cuts in Plan expenditure.

The finance ministry had proposed to contain its fiscal deficit at 4.8 per cent of GDP in 2013-14.

The finance ministry had also, on 18 September, announced a new round of austerity measures and signalled its intent to hold subsidy payouts within projected levels.

The austerity measures are expected to bring in savings to the tune of Rs20,000 crore for the whole financial year, although revenue receipts are lagging.

The centre collected Rs1,83,000 crore in taxes in April-August, about 20.8 per cent of the Rs8,84,000 crore budget estimate for the fiscal 2013-14. Tax collections during the corresponding period of 2012-13 stood at 22.7 per cent of the budget estimates for 2012-13.

With slower growth in the economy leading to a fall in tax collections, the government may now be forced to announce a cut in Plan expenditure as early as next month to meet the 4.8 per cent fiscal deficit limit for the current fiscal year.

While the government may try to reduce Plan spending, non-plan expenditure could still go up, forcing government to exceed the projected fiscal deficit for the current fiscal.