India’s Fiscal Deficit In August At 78.7% Of 2019-20 Target

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

The gap between the government’s revenue and expenditure rose to Rs 5.53 lakh crore as of August, according to data released by the Controller General of Accounts. That’s 78.7 percent of the budgeted estimate of Rs 7.04 lakh crore for 2019-20. In July, the deficit stood at 77.8 percent of the target.

Still, the fiscal deficit level is lower than that of August last year when it had reached 94.7 percent of the FY19 target.

Capital expenditure stood at Rs 1.36 lakh crore in August 2019, 40.3 percent of an estimate of Rs 3.38 lakh crore.

Other highlights:

• Revenue receipt stood at 30.7 percent of the budgeted target of Rs 6.03 lakh crore.
• Tax revenue stood at 24.5 percent of the budgeted target of Rs 4.04 lakh crore.
• Non-tax revenue stood at 63.4 percent of the budgeted target of Rs 1.98 lakh crore.

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.

But the government said it will not cut spending for the current fiscal year even after it announced a Rs 1.45-lakh-crore stimulus in the form of corporate tax rate cuts. “At this stage, I am only looking at getting this expenditure going on. Because they (ministries) are all committed. I am having every department to go ahead with what has been scheduled in the budget,” Sitharaman had said last week

“I will have to, obviously, nearer the time, look at reconciling all this and also look at my budget commitment as regards to the fiscal deficits,” she said.