What comes as a silver lining amid a spate of weak macro data, the government spending in key sectors gathered pace in the month of July, according to an Elara Capital research report.

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The increased spending comes as the Narendra Modi government pushes measures to address the slowdown concerns in the economy and enhance liquidity in the system.

The total expenditure of the government in April-July 2019 rose to 34 percent of budget estimate compared to 26 percent in April-June 2019 and 36.4 percent in April-July 2018, the report said. In particular, capital spending picked to 32 percent of the budget estimate from 19 percent of the budget estimate during the same period.

The indication that the dues towards the private sector may have already begun to be settled, revenue expenditure rose to 34 percent of budget estimate in April-July 2019 from 27 percent in April-June 2019, it added.

The spending in the roads sector improved multifold with the total spending now 39 percent of the budget estimate from 1 percent of the budget estimate until June 2019 suggesting that dues towards road sector contractors may have already begun to be settled.

The April-July fiscal deficit at Rs 5.47 lakh crore is 77.8 percent in April-July 2019 compared to 61.4 percent during April-June 2019 and 86.5 percent in April-July 2018. The relatively lower fiscal deficit this fiscal compared to last fiscal mainly is on account of the relatively lower pace of spending this fiscal, the report added.

Importantly, the fiscal deficit funding data shows that the government has been using small savings fund to a large extent to bridge the deficit in absence of robust revenue receipts.

In fact, until July, the government had funded 38 percent of its fiscal deficit through small savings compared to just 14 percent during April-July.

“We expect the reliance on small savings to dip going forward as government receives RBI dividend bonanza,” the Elara Capital’s report said. The Reserve Bank of India had on August 26 approved a transfer of Rs 1.76 lakh crores surplus to the government as dividend, the highest ever dividend doled out by the central bank in its history.

Growth of eight core industries dropped to 2.1 percent in July, mainly due to contraction in coal, crude oil and natural gas production, according to a government data released on Monday.

The eight-core sector industries — coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity — had expanded by 7.3 percent in July last year.

These core industries comprise 40.27 percent of the weight of items included in the Index of Industrial Production (IIP).

The output of coal, crude oil, natural gas and refinery products recorded negative growth during the month under review.

Also, the GDP data has shown deceleration with the growth rate coming down to over six-year low of 5 percent in the first quarter of the current fiscal, mainly on account of a sharp dip in the manufacturing sector, which registered almost a flat growth of 0.6 percent.

First Published:Sept 3, 2019 5:47 PM IST