India’s Fiscal Deficit In April-February Reaches 135% Of 2019-20 Target
The fiscal deficit was Rs 10.36 lakh crore during Apr-Feb period of FY20 as compared to the revised target of Rs 7.67 lakh crore.
India’s fiscal deficit for the April 2019 to February 2020 period touched 135.2 percent of the revised target of 3.8 percent of GDP, government data showed.
The gap between the government’s revenue and expenditure, during the same period, in 2018-19 was 134 percent of the previous year’s revised budget estimate, according to data on the website of Comptroller General of Accounts.
The fiscal deficit, in absolute terms, was Rs 10.36 lakh crore during the period as compared to the target of Rs 7.67 lakh crore for financial year ending March 31, 2020. In the Union Budget for 2020-21, India invoked an escape clause to revise upwards its fiscal deficit target for FY20 from the previously budgeted Rs 7.03 lakh crore.
The trend of fiscal deficit exceeding the target is not new as the government gets a chunk of its taxes in March, especially through advance taxes. But this fiscal, its direct taxes were short by a little over Rs 2 lakh crore as on March 16.
Given the subdued tax collections, financing some part of the relief package announced by the government through FY20 resources would mean India will have to rely on stretching fiscal deficit limits significantly above the FRBM limit which was already relaxed in the budget for FY20, said DK Srivastava, chief policy adviser at EY India. The fiscal deficit target for FY21 will also have to be revised, he said.
The government’s revenue during April-Feb was Rs 13.78 lakh crore—or 74.5 percent of the revised target for 2019-20. This compares with 73 percent of the estimated revenue being collected in the same period last year.
The government’s revenues, especially tax collections and divestment receipts, have been sluggish in the current fiscal.
A slowdown in India’s growth affected the government’s tax mop-up with direct tax collections falling 5 percent year-on-year as on March 16, despite advance tax payments. The government is expected to miss its revised divestment target of Rs 65,000 crore as a rout in the stock markets on the back of the novel coronavirus outbreak, derailed its PSU stake sale plan.
However, Economic Affairs Secretary Atanu Chakraborty today said the government had made realistic estimates for its revenue and expenditure while projecting its fiscal deficit.
“Forbearance of 0.5 percent of GDP was also taken (for fiscal deficit). Therefore, for the past year, the issue of fiscal deficit is not much in question,” Chakraborty said while announcing India’s borrowing plan for April-September.
Some amount of revenue shortfall generally can be compensated by lower expenditure, especially on capital expenditure because the economic activity is on a standstill in March, said Devendra Pant, chief economist at India Ratings. There, however, may be some slippage from the revised fiscal deficit target, Pant told BloombergQuint.
Total expenditure during the same period was Rs 24.65 lakh crore, representing 91.4 percent of the revised budget estimate.
Other Highlights:
- Capital expenditure stood at 87.5 percent of revised target of Rs 3.48 lakh crore.
- Tax revenue was 74.1 percent of the target at Rs 11.14 lakh crore.
- Non-tax revenue was Rs 2.63 lakh crore, or 74 percent of the revised target.