Higher fiscal deficit due to Budget being advanced, was expected: Chief Statistician

Higher fiscal deficit due to Budget being advanced, was expected: Chief Statistician

Government's Chief Statistician T.C.A. Anant

Government’s Chief Statistician T.C.A. Anant

By Vishav,

New Delhi : Government’s Chief Statistician T.C.A. 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,” Chief Statistician T.C.A. Anant told IANS in an interview.

He said 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.”

“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,” the Chief Statistician said.

However, the revenue profile has remained pretty much the same, he added.

“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.

(Vishav can be contacted at vishav@ians.in)


Adverse factors have played out, economy back on rails: Chief Statistician T.C.A. Anant

Adverse factors have played out, economy back on rails: Chief Statistician T.C.A. Anant

Chief Statistician T.C.A. Anant

Chief Statistician T.C.A. Anant

By Vishav & Biswajit Choudhary,

New Delhi : The factors responsible for a five-quarter slump in the growth rate, including the adverse effects of demonetisation and GST implementation, have played out and the Indian economy is now poised to take an upward trajectory in the coming quarters, says the government’s Chief Statistician.

He also feels that concerns over slow agricultural growth and inflation were “over-blown” and that the current fiscal would “certainly end with inflation below four per cent”.

Although refusing to forecast the GDP growth rate for the complete fiscal, Chief Statistician T.C.A. Anant says the likely direction was going to be upward.

“If one considers the factors which led to a decline in GDP till the fourth quarter of the last fiscal and the first quarter this fiscal, it would be possible to argue that those factors have worked their way out and we should, therefore, see an improvement in growth,” Anant told IANS in an interview.

The first factor, Anant said, had to do with global commodity prices. These had crashed in 2014-15, resulting in lower input costs that boosted growth rates in 2014-15 and 2015-16. But once the commodity prices recovered they pulled down growth rates, as reflected in the slowdown in the last five quarters.

“Now, the general reading of market experts is that they are likely to stay at this level. If that expectation is maintained, then on this ground, I don’t expect to see any further changes or influence (on GDP calculation) from this source,” he said.

Last week, the CSO released the nation’s GDP for the quarter ending September, which showed a break in the slump of the five quarters, a rise in the manufacturing sector’s output and the economy poised to take an upward path in the coming quarters.

Anant added that there were also several domestic factors at play, including the crisis in the real-estate sector which saw very rapid growth in the high-growth period, and somewhat linked to it, the non-performing assets (NPA) situation.

“The government sought to address this problem through creating a new governance regime for the real estate sector. This regime is now in place and its adoption is under process. In so far as the real estate sector is concerned, the expectation is that as and when the adoption process becomes more complete, we will expect to see a revival in the sector,” he explained.

Regarding the NPA crisis, “which is causing a certain degree of drag in so far as private investment is concerned”, Anant said the process of creation of NPAs, or assets which turned bad, was now over to a certain extent and the economy was in the phase of trying to resolve the issue.

“In addition, during 2016-17, there were short-run effects caused by currency replacement where old notes were de-notified and a replacement process was put in place which led to a temporary shortage of cash. That cash replacement was pretty much complete before the end of the fourth quarter of last year.”

“The fourth major structural change which influenced the decline in growth rate up to the first quarter was the fact that the government decided to introduce the GST. This also created a natural disruption, particularly in manufacturing companies which were faced with the difficulty of the treatment of goods produced prior to GST and were, in their judgment, supposed to be sold after GST came in,” Anant elaborated.

He said this uncertainty led manufacturing companies to first pull down production and then get rid of inventories, all of which came to an end on July 1.

“If you look at all of these events as causation to the declining story which we see in place from the last five quarters, given the sort of responses which have been put in place to them, the belief is that you should now see an upward trajectory.”

“All of these have, so to speak, played out. Or at least the negative elements of these have played out. Their positive elements are still being played out. So if you put all of that together, the likely direction is going to be upward… The growth should improve. But how much is very hard to quantify,” Anant said.

Though the Reserve Bank of India (RBI) adopted a neutral stance on the policy rates earlier this week citing pressure on prices as one of the main reasons, Anant dismissed the concern over inflation.

“We are at a much lower level of inflation than we have ever been any time in the past… In fact, my judgment personally would be that we are going to end the financial year certainly below four per cent.

“The reason why I expect inflation to fall is because one of the factors which has led to prices rising in the last couple of months is food and we are now in the seasonal part where food prices tend to traditionally soften. So chances are that you would probably see the overall effect, even if it rises a bit, would not exceed four per cent. That’s my judgment,” Anant said.

On the slowdown in agricultural growth, the Chief Statistician said while there was a concern, it was over-blown. While there still is considerable dependence on the monsoon, agriculture had become a lot more robust, he said.

“In fact, if you look at our data, our output figures show much less volatility than moisture data, or monsoon data.

“This year’s production relative to last year is slightly lower. But if you look at it in a long-term perspective, this year’s production is substantially better than not just the previous two years — which you can say were drought years — but (also in terms of a) long time series, it is better than the best which was achieved any time in the past, even four or five years ago, when you had very good monsoon,” Anant said.

(Vishav can be contacted at vishav@ians.in and Biswajit Choudhury at biswajit.c@ians.in )