FY13 fiscal deficit at 4.9%; Stimulated by further reducing in planned expenditure - Karvy

Fiscal deficit for FY13 was reduced by INR 310.4 bn which now stands at 4.9% of GDP from the revised estimate of 5.2% and even below the initial budget estimate of 5.1%. Aggregate figure of fiscal deficit for the year is 5.1% lower than the actual deficit in FY12.

- Reduction in plan expenditure contributed 45.1% of improvement in the fiscal deficit. FY13 budgeted planned expenditure was sharply revised downwards in FY14 budget document by INR 91.8 bn primarily driven by significant reduction in economic services expenditure mainly Transport and Rural Development. Actual planned expenditure was further reduced by INR 149.0 bn i.e. by 3.5% over the revised estimate. This was largely driven by sharp cut down in transfer of funds to States and UT, Ministries of Power and Rural Development.

- Sharp reduction in government expenditure coupled with sluggishness in private investment has led to slow down in overall GDP growth which has staggered down to 5.0% in FY13.

- Fund transferred to Ministry of Rural Development expenditure was further reduced by INR 19.1 bn in addition to earlier downward revision of INR 222.7 bn in the budget. This indicates the domestic consumption is likely to remain weak in the subsequent year as well.

- Despite reduction in domestic market borrowing by 4.9% over the revised estimate, cash balances of government with RBI increased to INR 817.6bn (as on 29th Mar'13) on account of sharp cut in plan expenditure. Cash balances with RBI increased by 67.0% YoY, resulting in tight liquidity conditions in the last quarter

- Some of the items in non tax revenue increased significantly in Mar'13 specifically fiscal and social services. There is a likely possibility of revising these items downwards. Non Tax revenue increased by INR 80.3 bn over the R.E. partly due to increase in interest income and partly due to increase in other non tax revenue (fiscal & social services are part of other non tax revenue)

- Even after sharp revision in tax revenue collections in the budget document, net tax revenue collection for the entire year has a shortfall of INR 10.53 bn. This was mainly due to INR 118.0 bn of shortfall in direct tax collections. Meanwhile excise duty and customs duty collections were much higher than the R.E. which had been revised downwards in the budget.

Source : Equity Bulls

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