Indian two thousand rupee banknotes are arranged for a photograph in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Fiscal Deficit Target Likely To Be Met, Says Finance Ministry Official

The government will meet the fiscal deficit target for the current fiscal although there could be some slippages in the current account deficit because of high crude oil prices, a top finance ministry official said today.

The comfortable forex reserves built over the last three years will help the government deal with the volatility in oil prices in the international market, the official said. He, however said that price fluctuation has come down significantly to a manageable level.

“The current account deficit will not be as good as last year but it will not be as bad as some estimates because oil prices have not gone to the level people at some point of time projected,” the official said, requesting anonymity. “It will be pretty much in the range that we have estimated. It could be 10 basis points here or there.”

The official did not disclose the deficit estimate for the current fiscal 2018-19.

As per estimates, India’s CAD may widen to 2.5 percent of the gross domestic product due to higher oil prices—which has been accentuated by rupee depreciation.

CAD, the difference between the inflow and outflow of foreign exchange, jumped to $48.7 billion, or 1.9 percent of GDP in 2017-18. This was higher than $14.4 billion, or 0.6 percent, in 2016-17.

Also read: India’s Fiscal Deficit Reaches 68.7% Of FY19 Target

With regard to fiscal deficit, the official said the government is committed to meeting the target of 3.3 percent.

In the Union Budget 2018-19 presented in February, the government had revised the fiscal deficit target for 2017-18 to 3.5 percent from the earlier estimate of 3.2 percent. In absolute terms, the fiscal deficit had reached Rs 5.91 lakh crore, or 99.5 percent of the budget estimates.

On the revenue front, the official said that income tax collection has been robust, with E-way and GST collection stabilising. “Revenue collection under Goods and Services Tax is well on track and could exceed the target.”

He also said that the rate cut introduced recently will have minor impact on the revenue collection but that would be compensated by increased compliance and e-way bill.

He said that the government would meet the disinvestment target of Rs 80,000 crore projected for the current fiscal.

As far as inter-creditor agreement is concerned, the official said that as many as 31 banks and financial institutions have signed this.