Financial Daily from THE HINDU group of publications
Friday, May 31, 2002
Industry & Economy - Economy
Fiscal deficit set to end closer to 6 pc -- Rs 10,000-cr revenue shortfall seen
NEW DELHI, May 30
THE Centre has failed to meet its fiscal deficit target of 5.7 per cent of the gross domestic product during 2001-02. The fiscal deficit is set to widen and end closer to 6 per cent of the GDP due to the massive shortfall in tax revenues vis-a-vis revised estimates, according to a top Finance Ministry official.
The Controller General of Accounts (CGA), which will be releasing provisional final accounts on Friday, has informally appraised the Finance Ministry of a 0.2 to 0.3 per cent slippage in fiscal deficit vis-a-vis the revised estimates for 2001-02.
The shortfall in tax revenues is estimated at around Rs 10,000 crore, of which over Rs 5,200 crore is in direct taxes. The Centre had budgeted gross tax collections at Rs 1,96,693 crore in the revised estimates for 2001-02.
The slippage in fiscal deficit has been despite some compression in expenditure. Total expenditure during 2001-02 is estimated to be nearly close to Rs 1,000 crore lower than the revised target of Rs 3,64,436 crore.
Defence expenditure is projected to be around Rs 1,000 crore lower than the revised estimate of 57,000 crore. The savings in defence expenditure has, however, been offset by Plan expenditure which has overshot the revised target of Rs 95,100 crore by Rs 1,000 crore.
Officials said that the compression in total expenditure has been mainly on the non-Plan side since the Finance Ministry had turned down requests of re-appropriation of a host of ministries.
"Given that the revised estimate of total expenditure was around Rs 10,787 crore lower than the Budget estimate, there was really no further scope for a massive reduction'', said officials.
Prior to the finalisation of provisional estimates, senior Government officials held that fiscal deficit target of 5.7 per cent of the GDP would be met despite the revenue shortfall. The optimism was based on the fact that the government did not resort to any market borrowings in March. However, extra monies to finance the deficit could have been channelised through the public account.
The overshooting of the fiscal deficit target has been solely on account of the shortfall in tax revenues. The Central Board of Direct Taxes (CBDT) which independently collates data on tax collections has projected actual direct tax collection at Rs 68,220.98 crore as compared to the revised estimate of Rs 73,497 crore - a shortfall of Rs 5,276.02 crore.
A further break-up indicates that the realisation from corporation tax stood at Rs 36,479.96 crore as compared to the revised estimate of Rs 39,059 crore, marking a decline of Rs 2,579.04 crore. Income-tax collections stood at Rs 31,741.02 crore as against Rs 34,438 crore, representing a shortfall of Rs 2,696.98 crore.
The performance on indirect taxes (particularly customs) too has been disappointing. The lack of buoyancy in excise revenues has been attributed mainly to the slowdown in the manufacturing sector. This has also been reflected in the slide in sales tax revenues in several States, said officials.
The give-aways in the 2001-02 Budget -- of the order of Rs 16,500 to Rs 17,000 crore - has also impacted the tax collections in 2001-02.
The Government has, in fact, come under flak for its failure to meet even the revised estimates on tax collections with experts questioning the sanctity of budget numbers. The Finance Minister, Mr Yashwant Sinha, had on Wednesday served notice to the I-T Department to get its act together and achieve the targets set for 2002-03 to avert any slippage in the fiscal deficit target.
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