India Insight:Government spending picks up in June quarter

Fiscal deficit reached 61% of the government’s Budget estimate (BE)during April-June 2016 (FYTD): This compares with 52% registered in April-June 2015. The cumulative fiscal deficit has reached 2.2% of GDP FYTD (vs.

the budget estimate of 3.5% of GDP for FY17).

Revenue spending up, capex spending down in June quarter: Thereseems to be frontloading of government spending in view of double digitgrowth seen in total expenditure at +19% YoY in June quarter (above the BEof +11.5%YoY for FY17). Looking at the breakup, revenue expenditure growthremained strong at +24%YoY FYTD (above BE of 12.5% for FY17). Capitalexpenditure, on the other hand, declined by 16%YoY in June quarter (belowthe BE of +5%YoY). The increase in spending in June quarter was largely ledby higher allocation towards food subsidies, interest payments and ministry ofrural development.

Gross revenue collection remains strong in June quarter: The centralgovernment's gross tax collections grew 31%YoY FYTD (well above the BE of12%YoY). Taking into account assignment to states, net tax collection was up55%YoY FYTD, well above BE of 12%YoY.