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India’s Fiscal Deficit Widens To 134.2% Of Target In February

The gap between government’s revenue and expenditure stood at Rs 8.51 lakh crore at the end of February. 



An auto-rickshaw travels along King’s Way boulevard flanked by the South Block of the Central Secretariat buildings, which houses the Prime Minister’s Office and the Ministries of Defence and External Affairs (Prashanth Vishwanathan/Bloomberg)
An auto-rickshaw travels along King’s Way boulevard flanked by the South Block of the Central Secretariat buildings, which houses the Prime Minister’s Office and the Ministries of Defence and External Affairs (Prashanth Vishwanathan/Bloomberg)

India’s fiscal deficit continued to widen in February even as the government remains confident of meeting the revised target for 2018-19.

The gap between the government’s revenue and expenditure stood at Rs 8.51 lakh crore at the end of February, or at 134.2 percent of the budgeted estimate of Rs 6.34 lakh crore for 2018-19, according to data released by the Controller General of Accounts. That’s the highest in at least a decade and even higher than the last fiscal, when the introduction of the goods and service tax led to volatility in tax collections. Last year, the fiscal deficit stood at 120 percent of the budget target at the end of February.

The government, in the interim budget presented on Feb. 1, revised the fiscal deficit target for 2018-19 at 3.4 percent of the GDP from 3.3 percent earlier, and maintained it at the same level for the next financial year.

A break-up of the data shows that the government is still behind on its revenue targets.

  • At the end of February, tax revenue was at Rs 10.93 lakh crore, or 73.7 percent of the full-year target, against 81.6 percent of the budgeted target a year ago. As on March 23, direct tax collections remained short by about 15 percent of the target.
  • Non-tax revenue touched 70 percent of the target compared with 60.2 percent last year.
  • Total revenue receipts stood at 73.2 percent of the target compared with 78.2 percent in April-February 2018.
  • Revenue deficit stood at 157.8 percent of the target during April-February 2019 compared with 119.3 percent in the same period last year.

Devendra Kumar Pant, chief economist at India Ratings and Research said that pressure is emerging from tax collections, which could put pressure on the government’s ability to meet the fiscal deficit target of 3.4 percent of GDP. Pant, however, believes that revised GDP data will make the target achievable.

...Slow pace of tax collection would keep pressure on fiscal deficit. A higher GDP number than the one used in budget will help government inching closer to FY19 fiscal deficit at 3.4 percent of GDP.
Devendra Kumar Pant, Chief Economist, India Ratings & Research

Total expenditure for the April-February 2019 period was at Rs 21.88 lakh crore, or 89.1 percent of the full-year target. That’s lower than the 90.1 percent of the budgeted target for the April-February 2018 period.

  • Capital expenditure touched 86.6 percent of the 2018-19 target compared with 108.9 percent a year ago.
  • Revenue expenditure was at 89.4 percent of the full year target at the end of February compared to 87.5 percent last year.

The government has scrambled over the last few weeks to close divestment deals, raised funds through exchange-traded funds, and pushed tax agencies to step up their efforts to collected taxes to meet its fiscal deficit target.

Speaking to the media while announcing the government borrowing calendar for the first half of the year, finance secretary Subhash Chandra Garg reiterated that the government would meet the fiscal deficit target.