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India’s Fiscal Deficit In September At 92.6% Of 2019-20 Target

The gap between the government’s revenue and expenditure rose to Rs 6.51 lakh crore as of September.

The North Block of the Central Secretariat building, which houses the Ministries of Finance and Home Affairs, stands in New Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)
The North Block of the Central Secretariat building, which houses the Ministries of Finance and Home Affairs, stands in New Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

India’s fiscal deficit widened in September over the previous month.

The gap between the government’s revenue and expenditure rose to Rs 6.51 lakh crore as of September, according to data released by the Controller General of Accounts. That’s 92.6 percent of the budgeted estimate of Rs 7.04 lakh crore for 2019-20. In August, the deficit stood at 78.7 percent of the target.

Still, the fiscal deficit level is lower than that of September last year when it had reached 95.3 percent of the FY19 target.

Capital expenditure stood at Rs 1.87 lakh crore in September 2019, 55.5 percent of an estimate of Rs 3.38 lakh crore.

Other highlights:

  • Revenue receipt stood at 41.6 percent of the budgeted target of Rs 19.6 lakh crore.
  • Tax revenue stood at 36.8 percent of the budgeted target of Rs 16.4 lakh crore.
  • Non-tax revenue stood at 66.7 percent of the budgeted target of Rs 3.13 lakh crore.

The fiscal deficit trend is a bit worrisome, said Devendra Pant, chief economist of India Ratings. “Had there not been one-time windfall gain from the RBI, the fiscal deficit would have looked much worse,” Pant said. “The worrying trend is dismal performance of tax revenue.”

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The government is likely to run a fiscal deficit higher than the 3.3 percent of GDP target announced in Union Budget 2019-20 because of the recent cut in corporate tax rates. “Revenue foregone for the reduction in corporate tax rate is Rs 1.45 lakh crore per annum,” Finance Minister Nirmala Sitharaman had said.

That means the fiscal deficit will get pushed to Rs 8.48 lakh crore, assuming all components of government revenue and expenditure remain unchanged. According to Union Budget documents, the fiscal deficit in actual terms was pegged at Rs 7.04 lakh crore.

This fiscal deficit of Rs 8.48 lakh crore works out to 3.97 percent of India’s GDP, using the nominal GDP assumptions made in the Union Budget.

To be sure, the final fiscal deficit will be influenced by any higher-than-expected increase in tax collections, lower spending or a pick-up in asset sales.

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