The core sector growth for December 2019 improved and grew by 1.3 per cent as against the 0.6 per cent contraction seen a month ago. However, it was lower than 2.1 per cent growth witnessed in December 2018.
During the first nine months of the fiscal year 2019-20, the fiscal deficit of the central government has surpassed its budgeted estimate. During April-December 2020, the actual fiscal deficit was at 132.4 per cent of the budget target. The fiscal deficit during this period was Rs 9.4 lakh crore, higher than higher than the budgeted Rs 7.04 lakh crore for FY20. Lower tax collections and lower disinvestment proceeds coupled with significant growth seen in both revenue and capital expenditure has led to higher fiscal deficit.
The revenue receipts collection was lower at only 58.4 per cent of the budget estimate lower than 62.8 per cent seen in the corresponding period last year.
Tax collections were low at 54.9 per cent of the budgeted estimate for FY20. The decline has been on account of lower corporate tax collection, integrated GST, customs and service tax.
Non-tax revenue was higher at 77.3 per cent of the budget estimate compared with 60.3 per cent in the corresponding period last year. These are aided by higher receipts by way of dividends and profits (99 per cent of the budgeted).
Capital receipts are only 25.9 per cent of the budget estimate much lower than the 50.5 per cent in the comparable period last year.
Only 17 per cent of the disinvestment budgeted target has been achieved during the first nine months of FY20, lower than the 43 per cent last year. Disinvestment proceeds amounted to Rs 18,100 crore out of Rs 1.05 lakh crore budget target.
Revenue expenditure is on par with last year at 75.7 per cent of the budget target.
Capital expenditure is higher at 75.6 per cent of budget compared with 70.6 per cent in the comparable period last year indicative of focus of the government on asset creation.
We are expecting around 0.5 per cent slippage in the fiscal deficit, which is expected to move to 3.8 per cent of GDP for FY20.
Core Sector update -December 2019
The core sector growth for December 2019 improved and grew by 1.3 per cent as against the 0.6 per cent contraction seen a month ago. However, it was lower than 2.1 per cent growth witnessed in December 2018. The growth has been aided by improvement in the production in 3 industries namely refinery products, coal and fertilizers. In terms of cumulative growth in the eight core industries during April-December 2019, the growth was 0.2 per cent compared with the 4.8 per cent growth registered during April-December 2018.
Industry-wise growth:
Coal production increased by 6.1 per cent in December 2019 over December 2018 with after sustained contraction seen in the previous five months.
Crude Oil production declined by 7.4 per cent in the month compared with the contraction by 4.3 per cent in the comparable month a year ago.
The production of the natural gas too has contracted by 9.2 per cent as against 4.2 per cent growth seen in December 2018 registering sustained contraction for the nine months.
Refinery products, which have highest weight in core sector, grew by 3 per cent as against a contraction by -4.8 per cent in December 2018.
Fertilizers have seen a double digit growth by 10.2 per cent in December 2019 as against -2.3 per cent de-growth seen in December 2018.
Steel production increased by 1.9 per cent in December 2019, after registering sustained contraction in the past 3 months. It is also lower than the 10.1 per cent growth seen in December 2018.
The production of cement grew by 5.5 per cent higher than previous month (4.3 per cent in November 2019) but it was much lower than the 11.6 per cent growth seen in December 2018.
Electricity production contracted for the successive fifth month in December 2019 by 1.9 per cent as against the 4.4 per cent growth seen in the corresponding month a year ago.
CARE Ratings- view
Based on the core sector growth, IIP is expected to grow by 2 per cent for December 2019 which would also be aided by the base effect. We are expecting IIP to grow by 4 per cent for FY20.
COURTESY: CARE RATINGS- Fiscal and Core Sector Update
Disclaimer: This report is prepared by CARE Ratings Ltd. CARE Ratings has taken utmost care to ensure accuracy and objectivity while developing this report based on information available in public domain. However, neither the accuracy nor completeness of information contained in this report is guaranteed. CARE Ratings is not responsible for any errors or omissions in analysis/inferences/views or for results obtained from the use of information contained in this report and especially states that CARE Ratings has no financial liability whatsoever to the user of this report.
ABOUT THE AUTHORS:
Madan Sabnavis is Chief Economist. He can be contacted on: madan.sabnavis@careratings.com or 91-22-68374433
Dr Rucha Ranadive is Economist. She can be contacted on: rucha.ranadive@careratings.com or 91-22-68374406