he trend in Union finances by the end of May 2008 is worrisome, with the revenue deficit surpassing the 2008-09 projection by a hefty margin while the fiscal deficit - that is borrowings from all sources netted for revenue receipts and non-debt creating capital receipts - has already approximated to 55% of total for the year.

Revenues, especially tax revenues, have been buoyant during this period but there has been no let-up in expenditure, causing the fiscal arithmetic to go haywire.

This picture could conceivably change in the months ahead, but it is doubtful whether the turnaround will be significant enough to ensure that the broad budgetary framework can be adhered to when the final tally is drawn.

To add to the woes, the budget for the year had not provided for the huge outgo on account of the implementation of the Pay Commission's recommendations; the liability due to the farm waiver has been revised higher while the food and fertiliser subsidies are slated to be more than what had been envisaged.

As of now, the budgetary position is far from satisfactory. The revenue deficit stood at Rs 55.184 crore by May 2008 and the fiscal deficit at Rs 73,201 crore.

Never in the recent past, have these two indicators both been at the levels they are at this point of the current fiscal.

All the main heads of income and spending thus far are more than what they were a year ago. In relation to the budget estimates, revenue receipts worked out to 6%; this is larger than the previous year's 5.3%.

In particular, tax receipts stood at 6.3% as against 5.4%. The mop-up from corporation tax was to the order of Rs 9,603 crore (against Rs 6,072 crore in the previous fiscal), from income tax (net) Rs 14,001 crore (Rs 7,955 crore), customs Rs 19,028 crore (Rs 15,323 crore) and service tax Rs 6,136 crore (Rs 4,356 crore).

The only exception to this trend was union excise, where collections during the period April-May 2008 were nearly unchanged at the preceding year's level, at Rs 7,437 crore. In general, gross tax yield was 37% higher at Rs 57,867 crore.

Thus, the resource mobilisation effort had proceeded at a good pace during the first two months of the current fiscal vis--vis the preceding year.

In addition, the centre had also resorted to market borrowings on a larger scale - Rs 21,320 crore - constituting 19% of the total market borrowings for 2008-09.

At the end of May 2007, this source had contributed only 3% of that year's market borrowing programme. Besides, the government had also tapped small savings, provident funds to garner funds unlike last year when there were repayments under these heads during this period.

Essentially, therefore, the culprit is expenditure which has outrun the resources by a wide margin during the April-May 2008 period.

As a proportion of the budget, total expenditure stood at 14.6% (13.3% in 2007-08); while the non-plan spending was only fractionally lower at 14.1%. Plan expenditure rose to 15.6% from 11.3%.

Here, a caveat is in order. Within the plan expenditure, it is the revenue component that had recorded a substantial increase to 16.1% thus far, from the year-ago figure of 11.1%.

On the other hand, capital spending - that is, funds earmarked for the creation of assets was up only marginally to 12.4% from 12.3%.

The budget for 2008-09 had envisaged the revenue deficit at 1% of the GDP and the fiscal deficit at 2.5%.

The fiscal position as of May 2008 suggests that the fulfilment of these targets calls for Herculean efforts.