The government strongly defended the 4.5% GDP growth, saying foundation of the economy is strong and that GDP growth has bottomed out in Q2.
The deficit was at 103.9 per cent of 2018-19 Budget Estimate (BE) in the corresponding month a year ago. The government has estimated the fiscal deficit for the current financial year at Rs 7.03 lakh crore, aiming to restrict the deficit at 3.3 per cent of the gross domestic product (GDP).
In September, the government decided to lower tax rate for corporates and has pegged that it will have an impact of Rs 1.45 lakh crore on its revenue mobilisation. Tax sops were intended to boost investment cycle in the face of slowing GDP growth, which had dipped to six-year low of 5 per cent in the first quarter ended June of this fiscal.
However, GDP slipped further to over six-year low of 4.5 per cent in the second quarter ended September, as per the government data released on Friday. Further, the CGA data showed that government’s revenue receipts during the April-October period of 2019-20 period rose to 46.2 per cent of the BE as compared to 45.7 per cent in the corresponding period last year. In absolute terms, revenue receipts stood at Rs 9.07 lakh crore at the end of October. For the entire 2019-20, the revenue receipts have been pegged at Rs 19.62 lakh crore. Capital expenditure stood at 59.5 per cent of the BE during April-October period as compared to 59 per cent in the year-ago period, the CGA data showed. Total expenditure during April-October stood at Rs 16.54 lakh crore, or 59.4 per cent of the BE. The government has pegged its total expenditure for 2019-20 at Rs 27.86 lakh crore.
The fiscal deficit figure in monthly accounts during a financial year is not necessarily an indicator of fiscal deficit for the year, as per the CGA. Its data gets impacted by temporal mismatch between flow of non-debt receipts and expenditure up to that month on account of various transitional factors both on receipt and expenditure side, which may get substantially offset by the end of the financial year.
Output of eight core infrastructure industries contracted for the second month in a row by 5.8 per cent in October, the lowest in over a decade, indicating the severity of economic slowdown.
As many as six of eight core industries – coal, crude oil, natural gas, cement, steel and electricity -- saw a contraction in output in October. Coal production fell steeply by 17.6 per cent, crude oil by 5.1 per cent, and natural gas by 5.7 per cent, according to the data released by the government on Friday. Production of cement (- 7.7 per cent), steel (- 1.6 per cent), and electricity (- 12.4 per cent) also declined during the month. The only sector that posted growth in October was fertilizers where production increased by 11.8 per cent year-on-year. Growth in output of refinery products slowed down to 0.4 per cent in October as against 1.3 per cent in the same period last year. The eight core sectors had expanded by 4.8 per cent in October 2018.
During the April-October period, the growth of core industries fell to 0.2 per cent against 5.4 per cent in the year-ago period. Output of these sectors had contracted by 5.1 per cent in September, the lowest in the decade.
Commenting on the data, ICRA Ltd said based on the unfavourable performance of the core sector, the contraction in the IIP appears set to deepen in October 2019. “The sharp worsening in the performance of electricity generation and cement in October 2019, offset the sequential improvements in refinery production, fertilisers and coal, resulting in an even deeper contraction of the core sector output in that month,” it said in a statement.