Government's Chief Statistician TCA Anant has no worries that the government may breach the fiscal deficit target of 3.2 per cent of the GDP for the current fiscal. In fact, he feels revenue would be buoyant by year-end and that the targeted deficit would be bridged.
"It's bad accounting to compare the fiscal deficit reaching 96 per cent of the target in October (compared to 79 per cent last year). They are not taking into account a significant policy initiative that the government has taken this year -- the preponement of the Budget," the Chief Statistician said.
He said that it was a conscious policy reform and the surprise about its impact on fiscal deficit was "befuddling" because the move had led to expenditure profile shifting towards the beginning of the year with revenue profile remaining the same.
"This is something anyone could have predicted when we decided to prepone the budget. That, come October, we are going to get a higher fiscal deficit picture," Anant said.
India's budgetary fiscal deficit for the first seven months of 2017-18 stood at 96.1 per cent -- Rs 5.25 lakh crore -- of the full year's target of Rs 5.46 lakh crore, as per the data furnished by the Comptroller General of Accounts (CGA).
"The Budget preponement was done largely with a view to permit government expenditure to start from April 1... The purpose was to shift the time-profile of the government expenditure to increase the expenditure in the earlier quarters -- front-loading," Anant said.
"To a certain extent, that has succeeded. Because if you look at the share of government expenditure as a percentage of budget expenditure which was done in the first six months -- it is higher this time than the share of expenditure to budget expenditure of last time," he added.
However, the revenue profile has remained pretty much the same, he further said.
"Just these two phenomena would lead you to get what you should get: A higher deficit this time than you got last year. Remember, the revenue profile also has the bulk of the revenue coming in the last quarter. So if the budgetary estimates remain on line, then there is nothing to worry about. Since revenues come in during the last quarter, what you really need to look at is how does it work out in the full year," he pointed out.
Anant added the reason for the conscious decision to advance the Budget this year dates back to almost a decade when there were a series of reports on expenditure management recommending the same. These expenditure management commissions had said there was a tendency to bunch government expenditure in the last quarter, which was criticised for a variety of reasons.
"The argument was the quality of expenditure is inferior when you bunch it in the last quarter. Largely what happens is that you are into exhausting the budget, so you spend it on whatever you can spend it on, rather than what you should be spending it on," Anant said.
"Also, from the viewpoint of capital formation and investment-related things, when you begin expenditure on a project late, the risk of the project getting held up is higher because the budgetary approval will lapse... So the whole work will be held up until the amount gets reauthorised," he said.
Anant added that the budget schedule was a detriment to front-loading because the formal authorisation was often not made available till some time in June, which used to create a handicap because, by that time, the monsoons used to set in and some activities could not be initiated.
"So all of this was a conscious choice as to why you would wanted to bring the budget date a little ahead so you could begin the expenditure on April 1," he said.