India is spending less on food, fuel and fertilizer subsidies as the $2.6 trillion economy seeks to narrow its budget gap to the lowest in 11 years. In the first three months of the financial year that began April 1, it spent Rs 1.17 lack crore ($17 billion) on major subsidies, lower than the Rs 1.35 lakh crore doled out a year ago, data show.
However, the fiscal deficit goal of 3.3 percent of gross domestic product still faces risks from high crude oil prices and pressure on the government to spend more before general elections next year. India met the upwardly revised fiscal deficit target of 3.5 per cent of GDP in 2017/18.
India reported a fiscal deficit of $62.57 billion for April-June, or 68.7 percent of the budgeted target for the current fiscal year, better than 80.8 per cent a year ago.
The government has outlined a fiscal deficit target of 3.3 per cent of GDP in 2018-19 as against a revised estimate of 3.5 per cent in 2017-18, indicating some fiscal consolidation, albeit at a slower pace than that recommended under the Fiscal Responsibility and Budget Management (FRBM) framework.
The government's optimism to meet fiscal target is due to higher tax collection in the first quarter. Driven by a sharp rise in indirect tax collections in April-June 2018, government's gross tax revenues jumped 22 per cent in the quarter, while the net tax revenues rose faster at 34 per cent. However, there was a modest growth in direct tax as corporate tax collections were lower in the quarter compared with the year-ago figure.
Non-tax revenues were up 39.1 per cent from that a year ago. The lower 6.6 per cent growth in revenue spending has also allowed the government to rein in fiscal deficit even as capital spending grew at a brisk pace.
Capital spending was up 27 per cent in the quarter from a year ago, with roads and railways being the key spenders. Both revenue and capital spending were 29 per cent of their respective budget estimates, with the former higher than last year while the latter being lower at the same point.
Disinvestment receipts during the quarter were Rs 8,760 crore against Rs 7,690 crore a year ago.