The central government stepped up its capital spending in October 2017, with the result that its total capex this year till end-October was Rs1.6 trillion, compared to Rs1.2 trillion in the same period last year. That’s a sizable boost to investment demand.
The boost to revenue expenditure is even more this fiscal year; till end-October it is Rs1 trillion more than last year.
But while the government’s net tax receipts have gone up by Rs1 trillion over the period, its total receipts have gone up by only about Rs0.4 trillion. Gross tax revenues are up 18.9% in April-October 2017, compared with the same period a year ago.
With expenditure outpacing revenues so far this year, the upshot is that the fiscal deficit was higher by Rs1 trillion compared to last year and is 96.1% of this year’s budgeted amount. The revenue deficit is 124.7% of the budgeted amount.
The figures show that 1) the government has already given a substantial boost to the economy and 2) the government must either curb its expenditure or miss its fiscal deficit target. In any case, as Madan Sabnavis, chief economist at CARE Ratings, says, there’s no question of the central government providing a fiscal boost in the remaining part of the fiscal year. The private sector will therefore have to pick up the slack.