The union government's fiscal deficit totalled 98.9 per cent of the budget estimate (BE) for the entire year 2014-15 fiscal in the first eight months (April-December) alone, despite an easing of the oil subsidy burden due to a plunge in crude prices.
Official data issued on Wednesday showed the deficit stood at Rs5,25,000 crore, against the full-year's BE of Rs5,30,000 crore. For the corresponding period last year, the deficit was 93.9 per cent of the full-year BE.
It is thus inevitable that finance minister Arun Jaitley will have to enforce massive spending cuts in the year's final quarter (January-March).
While higher excise on petrol and diesel would provide some buoyancy in the rest of the financial year, substantial shortfalls in tax collections relative to the BE seem inevitable.
Faced with a potential shortfall of Rs1,05,000 crore in the tax revenue, Jaitley will hope for disinvestment, telecom spectrum sales and public sector companies' dividends to garner revenue. He might lean on state-owned companies, sitting on a Rs2,00,000 crore cash pile collectively, to pay higher dividends to the government.
Additionally, with only one divestment completed, that of Steel Authority of India for Rs1,700 crore, the next two months are crucial for the disinvestment department. It is supposed to divest stakes in Coal India Ltd, NHPC, Oil & Natural Gas Corp and a host of smaller companies such as Container Corporation, Rural Electrification Corporation and Power Finance Corporation.
A planned Rs15,000 crore residual stake sale in Hindustan Zinc and Bharat Aluminium, and a Rs6,500 crore stake sale in SUUTI companies are already off the table for this financial year.
Jaitley's ministry has already instructed other central departments to effect a 10 per cent cut in non-plan spending, excluding interest payment, repayment of debt, capital spending for defence, salaries, pensions and grants to states. It is likely there will be substantial cuts on plan spending as well, which will affect centrally-sponsored schemes.
For the first eight months of 2014-15, tax revenue of the centre has been Rs4,13,000 crore, about 42.3 per cent of the full-year BE of Rs9,77,000 crore.
For April-November last year, it was 45 per cent of the full-year target. Non-tax revenue was Rs1,28,000 crore, about 60.4 per cent of the full-year target of Rs2,13,000 crore, compared to 61.8 per cent for the corresponding period last year.
Total revenue, including capital receipts (excluding market borrowing), was Rs5,49,000 crore. This is 43.4 per cent of the full-year BE of Rs12,64,000 crore, compared with 45.6 per cent for April-November 2013.
Expenditure has been on similar lines as last year.
Non-plan spending was Rs7,81,000 crore, about 64 per cent of the full-year target of Rs12,20,000 crore, compared with 65.8 per cent for the first eight months last year. Softening of global crude oil prices and resultant impact on subsidies helped cap spending.
Plan spending for April-November was Rs2,94,000 crore, about 51 per cent of the full-year target of Rs5,75,000 crore, compared with 52.4 per cent for April-November last year.