Telcos may help government achieve fiscal target

The government may achieve its fiscal deficit target of 4.1 per cent, thanks to the telecom companies which made upfront payments for the spectrum on the last day of the financial year. The government was rescued by telecom majors like Bharti Airtel, Idea and Reliance Jio, among others, which made a payment of Rs 10,808 crore on Tuesday. 

Though the government is still falling short of the revised estimate target, March usually shows a trend of closing the gap between receipts and expenditures. In the last month of the fiscal 2013-14, there was a reduction in the deficit by Rs 91,150 crore which helped the government achieve its target. 

Figures released for February by office of controller general of accounts, the ministry of finance, showed that fiscal deficit was 17.5 per cent over the revised estimate budget target till February. The report highlighted that the fiscal deficit stood at Rs 6.02 lakh crore, around Rs 90,000 crore higher than the revised estimate for 11 months till February. 

Non-debt capital receipts of the government stood at Rs 40,764 crore; it was the only area where the government was able to achieve 96.5 per cent of the revised estimate targets. 

Quality of fiscal adjustments

As the government embarks on fiscal consolidation and seems confident of achieving the target of 4.1 per cent, falling revenues has been a cause of concern. The government has only been able to achieve 72.5 per cent of its target till February compared with 76 per cent in the corresponding period last year. The performance has been more disappointing in case of tax revenues with the government just meeting 71.7 per cent of the target for 11 months. Falling profitability of the corporate sector, given the weak economic recovery, has mellowed revenue collection.

"Set against doubts over the quality of the country’s fiscal adjustment, focus is understandably on how the 2015-16 fiscal year—where the deficit target has been set at 3.9 per cent of GDP—will fare," economists at DBS Bank wrote in a research note.

The government in its maiden budget had revised the fiscal deficit target upwards for the current financial year from 3.6 per cent to 3.9 per cent. 

"Expenditure and revenue assumptions are more realistic than recent years. The target for divestment receipts, however, is still ambitious at Rs 695 billion (0.6 per cent of GDP), as less than half the target was met in recent years. Heavy reliance on these receipts has raised questions on the quality of consolidation achieved, as these are one-off in nature," they said.  

The government will achieve better valuations for its projects as it is expected to start with divestment as soon as the new fiscal year kicks in to move away from the strategy where divestments were made in the last quarter. The government plans to initiate stake sales in Power Finance Corporation, Bharat Heavy Electricals and Rural Electrification Corporation, among others, for the next year.

(Edited by Joby Puthuparampil Johnson)

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