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India’s Fiscal Deficit Reaches 59% Of FY21 Target In First Two Months

India’s fiscal deficit reached Rs 4.66 lakh crore or 58.6% of the Budget estimate in the first two months of FY21.

File photo of Finance Minister Nirmala Sitharaman. (Photo: PTI)
File photo of Finance Minister Nirmala Sitharaman. (Photo: PTI)

India’s fiscal deficit reached Rs 4.66 lakh crore, or 58.6%, of the budget estimate in the first two months of 2020-21 as a pandemic-led lockdown affected the government’s revenues.

The gap between government’s revenue and expenditure during the same period in FY20 stood at 52% of the budget target, according to data on the website of the Controller General of Accounts.

The government’s fiscal deficit target estimated in the Union Budget 2020-21 was Rs 7.96 lakh crore, or 3.5% of the GDP, but is likely to be revised due to the coronavirus' impact on the Indian economy.

India’s gross domestic product is seen contracting for the first time in 40 years. The country has also increased its borrowing for the current year to Rs 12 lakh crore against Rs 7.8 lakh crore budgeted earlier.

The fiscal deficit is 27% higher than the level in April-May 2019, underscoring that a substantial fiscal slippage is inevitable in FY21, according to Aditi Nayar, vice president at ICRA Ltd. The ratings agency expects India’s fiscal deficit to expand to Rs 13 lakh crore or 6.7% of GDP this fiscal.

India’s revenue receipts stood at Rs 44,667 crore, or 2.2% of the budget estimate, compared with the previous year’s target of 7.3%. The government’s net tax revenue was Rs 33,850 crore, or 2% of the budget estimates, in the first two months.

The extent of contraction in gross tax revenues narrowed to 37% in May from 44% in April led by indirect taxes, as transactions picked up with easing of lockdown curbs, Nayar said. The central goods and services tax collections amounted to Rs 18,961 crore in May compared to Rs 5,934 crore in April.

Total expenditure of the government was Rs 5.11 lakh crore, which was 16.8% of the full year target as compared to 18.4% spent last year based on that year’s target. Capital expenditure of the government was 13.4% of the budgeted target of Rs 4.12 lakh crore.

Other Highlights

  • Revenue expenditure at 17.4% of the full-year target of Rs 26.30 lakh crore.
  • Revenue deficit at 67.6% of the budget target at Rs 4.12 lakh crore.