Fiscal Deficit
3
Components of Fiscal Deficit
Fiscal Deficit
Trends of Fiscal & Revenue Deficit as % of GDP
Primary Deficit
A word on Revenue Deficit
Primary Deficit is a measure of current year's fiscal operation after excluding the liability of interest payment created due to past borrowings.
Major portion of the fiscal deficit was towards financing the revenue deficit, thereby was not accompanied by capital formation.
Net capital expenditure accounted for only 28% of fiscal deficit in 2013-14
Revenue Deficit leads to increase in borrowings without corresponding capital/asset formation.
- No asset back-up - Create an asset-liability mismatch
- During 2011-14, there were
improvements in the relative
share of the net capital
expenditure as a component
of fiscal deficit.
- Primary Deficit has shown a declining trend in period 2011-14.
Minor improvement in the ratio of fiscal deficit to the Gross Domestic Product (GDP) during current year was mainly attributable to a higher growth of 14.73 per cent in total non-debt receipt against an increase of 10.73 per cent in actual expenditure.
Revenue Expenditure VS Capital Expenditure
Analysis of Revenue Expenditure
Total Disbursements
Majority of Government expenditure goes towards revenue expenditure, which does not usually result in fresh creation of assets for the Government and is meant for normal running and maintenance of Government machinery.
3.
2.
Trend of Gross Receipts to GDP ratio
Resource Generation
Components of Gross Receipts:
2/3rd of the revenue expenditure is towards interest payments, subsidies & grants-in-aid.
1. Fiscal Deficit
Gross Receipts to GDP ratio has shown a steady decline in last three years indicating weak resource mobilization.
- Actual Expenditure is just 29.88 per cent of Total Disbursements.
- Substantial amount (around 59.11per cent of Total Disbursements) goes for Repayment of Public debt.
• Excess of actual expenditure over non-debt receipts.
• Indicates the required borrowing of the Government
and the increment to its outstanding debt.
Conclusion
Fiscal Deficit
Substantial portion of fiscal deficit is towards financing the revenue deficit and very
less amount actually goes in net capital expenditure.
Fiscal Deficits & its Parameters
• Represents the net incremental liabilities of the
Government made to bridge the budgetary gap
between revenue and expenditure.
- Fiscal deficit is good as long as a substantial part of it contributes to capital formation
Non- Tax Revenue
Resource Generation
Revenue resource generation is weak and the core sectors registered growth below GDP. Heavy dependency on capital debt borrowing.
Analysis of Revenue Receipts
(in crore)
74% out of Revenue Receipts is Tax Revenue
Preface
Analysis of Tax Revenue Receipts
Total Disbursements
The Finance Accounts of the Union Government is a presentation of receipts and disbursements together with the disclosure of financial results by revenue and capital accounts, accounts of debt, liabilities and assets worked out from the balances recorded in the accounts.
Union Financial Management Report: Story Retold
Substantial portion is towards routine maintenance & very less towards capital asset creation.
Chapter -1 of the Report provides trend analysis and information on performance of various fiscal indicators vis-a-vis their estimation and other policy frameworks. Chapter -1 provides a wealth of information on various parameters of the Union Government finances. Hence, various compelling stories can be derived from a thorough analysis of the numbers present in this Chapter.
There is high volatility among the various components of non-tax revenue, which indicates sporadic policy interventions or short term thrust in implementation.
However, for a quick appreciation we present a brief commentary on fiscal/revenue deficits and associated macro indicators. With this brief perspective,we hope readers would be able to appreciate this Report better.
- During 2013-14, the annual growth of gross taxes was lower than the growth of GDP.
- Income tax and Service tax continued to maintain the secular growth trend and registered growth over the GDP growth rate.
Unutilized Resources
Analysis of Capital Expenditure
- However, growth rate of Excise, Custom and Corporate was below the GDP growth rate indicating weak underlying economic activities in core manufacturing & trade sectors. The services & tertiary sectors, primarily contributed to growth in GDP.
Capital Receipts
Comptroller & Auditor General of India
Chapter -1
An overview of Union Finances 2013-14
Resources committed by external agencies for capital/asset creation and infrastructure development were not utilized by respective ministries indicating their weak absorption capacity and poor planning.
Predominantly, augmented by debt receipts which create future repayment obligations leading to reduction in the actual or potential asset base.
For more details on this report
Union Government
Accounts of the Union Government
Please visit the CAG website
www.cag.gov.in
for the year 2013-14
Accounts of the Union Government
Report No. 1 of 2015
Majority of capital expenditure (excluding loans and advances) goes into general & economic services.
(Financial Audit)
Report No.1 of 2015
(Financial Audit)
- Social Services: include education, health, water supply, sanitation, social security etc.
- Economic Services: include dairy development, animal husbandry, fisheries, forestry, plantation, food storage and warehousing, agricultural
and rural development programmes, user charges for irrigation, provision of energy, receipts of departmentally managed Government
Undertakings, etc.
- Fiscal & General Services : Police, Public Works, Defence, Others Administrative services, Grants-in-aid and Contributions etc.