In a cause of concern for the Finance Ministry, India’s fiscal deficit crossed half the budget estimate (BE) for 2014-15 in the first three months of the financial year. Fiscal deficit at the end Q1 FY15 was pegged at 56.1% of the budget estimate of Rs 5.31 lakh crore for the full fiscal year as growth in revenue receipts slowed and interest payments rose.
Total expenditure of the government during April-June was Rs 4.13 lakh crore or 23 percent of the entire year estimates. Of the total expenditure, plan spending was Rs 1,11,806 crore and non plan spending was Rs 3,01,797 crore. Conversely, revenue collection during the reported period was Rs 1,14,427 crore or 9.6 percent of the estimate, lowered than 11.1 percent of the estimates during 2013-14. Furthermore, total receipts (revenue and non-debt capital) of the government during the three months was Rs 1,15,744 crore. Revenue deficit in the three months was recorded at Rs 2,49,358 crore which was 65.9 percent of the estimates.
The government during budget 2014-15 has set fiscal deficit target at 4.1 percent of GDP this year and decided to lower it to 3 percent of GDP by 2016-17. In FY14, India’s fiscal deficit narrowed to Rs 5,08,149 crore or 4.5 percent of GDP as compared to 4.89% of GDP in the FY13. High fiscal deficit has adverse impact on country’s economy as it leads to three macro economic problems such as a balance of payments crisis, high interest rates because of crowding out and high inflation owing to the currency depreciation.