Budget deficit in the first quarter to 68.7% of the budgeted target for 2018-2019

NEW DELHI: India's budget deficit at the end of the first quarter of the current fiscal year was 68.7% of the budgeted target for 2018-2019, better than 80.8% a year ago.

Data are of increasing concern as the government may not reach the target of 3.3% of GDP, with recent reductions in the goods and services tax (GST) resulting in lost revenues while the National Health Protection Plan (MSP) support for farmers could increase spending.

"Despite the slight improvement in the budget deficit in the first quarter19 compared to last year's level, various fiscal concerns persist, especially if fiscal targets for GST revenues, dividends, and profits and disbursements would be made and if the expenditures required for the revised PSMs, the National Health Protection Plan, fuel subsidies and others, and the recapitalization of banks will prove adequate, "said Aditi Nayar, senior economist at the 39; ICRA.

Last month, the GST Council approved a new streamlining of the tax system, increasing the number of items from 18% to 32%. The international rating agency Moody's established a revenue loss of 0.04% to 0.08% of GDP a year, qualifying credit cuts as negative.

"Although the proportion of income loss is low, the hesitation of tax rates creates uncertainty around government revenues and is accompanied by persistent upside risks to its spending. ", said Moody's in a note on Monday.

Driven by a sharp rise in indirect tax recoveries in April-June 2018, gross tax revenues increased by 22% between the first quarter and June, while net cash receipts rose by 25%. Tax rose faster, by 34%. Direct tax growth was modest, with corporate tax recoveries being lower in the quarter compared with the previous year.

Non-tax revenue increased 39.1% from the previous year. The 6.6% lower growth in income spending has allowed the government to reduce the budget deficit even though capital spending has risen steadily.

Capital expenditures increased 27% in the quarter compared to last year, with roads and railways being the largest occupiers. Revenues and capital expenditures accounted for 29% of their respective budget forecasts, the former being higher than last year, while the latter were lower at the same point.

Disinvestment earnings in the quarter were Rs 8,760 crore against Rs 7,690 crore a year ago.