India - Public Finances - October 2012

Public Finance- Apr-Oct.12

Total Receipts: Revenue during Apr-Oct.12 was at 779467 cr , 52.3% of budget  and it grew by 14.6% YoY. It includes revenue and capital receipts. In eight months, the total receipts were 62.8% of the estimate for the whole year.

Revenue Receipts: Revenue received during Apr-Oct.12 was at Rs.404297 cr, 57% lower than the budget estimate of FY12-13. It grew 12.4% YoY compared to the same period last year. This contained tax and non tax receipts. Gross tax revenue was at Rs.486825 cr, 14.5% higher than the last year and it was before devolution to the states.

Capital receipts: It was at Rs.375170 cr during Apr-Oct.12, 32.4% lower than the whole year’s budget but it grew by 17% YoY.

In terms of composition of receipts, the share of all the sources did not show a big variation from the last year.  Non tax revenues were 100 bps lower than the last year at 9.09%. Borrowings composition increased by 208 bps of the total receipts and it was at Rs.367920 cr.

Total Expenditure: Overall plan and non plan expenses were at Rs.779467 cr, 52.3% of FY13 budget but it grew by 14.6% YoY.  Non plan expenses was at Rs.554518 cr, 15.7% higher than the same period last year where as plan expenses were at Rs.224949 cr, 11.8% higher than the last year.

Non plan composition of expenditure rose from 70.4% of revenue to 71.1% this year. This was much higher than the budgeted ratio of 65% of the total receipts. The variance on this count was very high.

The major variation was mainly accounted by subsidies which rose from 12.2% in the previous year to 20% this year. Since there was a sharp rise in this ratio , even saving on Interest payment of 2.25% of revenues were not enough to fill the gap.

Subsidies rose by more than Rs.66000 cr over the previous year and they were at Rs.148022 cr. Interest payments rose by only Rs.11000 cr. Pensions rose by Rs.600 cr over the previous year.

Revenue Deficit: During Apr-Oct.12, deficit was at Rs.285252 cr, 81.4% of the budget for FY13. It was higher by 17.4% compared to the previous year. The deficit was at 36.6% of the total receipts rising from 35.7% in the previous year. The budgeted ratio on receipts was only at 23.5% for the whole year, indicating the variance was very high.

 
Fiscal Deficit: Reported deficit was 71.6% of the budget for FY`13 at Rs.367920 cr. Deficit was higher than the last year by 19.8%. As a ratio of total receipts it rose from 45.1% to 47.2%  this year. This was much higher than the budgeted ratio of 34.5% of the total receipts.

Primary Deficit: Primary deficit during Apr-Oct.12 was at Rs.212069 cr, 30.5% higher than that of previous year. It was 109% of the whole year budget. The ratio had risen from 23.9% to 27.2% this year. The budget was only 13% of the total receipts.

The recent initiatives taken by the government in boosting the economic revival and the  growth numbers for Industry/ services reported during this week, indicate the movement towards revival of the economy. Already the stock market indicators had turned positive and this is likely to be followed by improvement in performance of the various sectors of the economy. The prospects for growth had improved substantially and now the investors and industries have turned bullish on the immediate prospects. There was a statement from the government that the borrowings would be managed well within the desired levels.

As I had presented on the Economic Prospects for India ,on 13^th September this year in the  Annual conference conducted by CFO Strategies forum , the pace  of the economy had picked up momentum. The government had moved ahead with fast response to the evolving economic crisis in India. The last three months was good for Capital markets and the investor sentiments revived. FII’s poured money into the markets and the IPO’s have started happening. The coal India has been asked to increase the output and sign FSA’s with the power producers. The gas allocation procedures were simplified. The government is inducting additional capital into the PSU banks , which will increase the lending capacity of these banks. The cash transfer was introduced which should put more money in the hands of poor which will result in higher consumption levels. The savings to be effected by various ministries was identified and non essential expenditure would be deferred.

The setting up of the cabinet Committee on Investments and merger of  Cabinet Committee on Infrastructure with  Cabinet Committee on Economic Affairs is likely to speed the faster implementation of projects which were stuck due to various reasons. We can expect traction in projects and capital expenditure by companies going forward, which will stimulate growth through investments..