Government may breach 3.2% fiscal deficit target for first time in four years; here’s why – The Financial Express–28.12.2017

The Narendra Modi government is heading for a likely breach of fiscal deficit target of 3.2% of the GDP on the back of slowing GST collections. The government has announced an additional borrowing of Rs 50,000 crore via gilts, which is double the amount that was estimated by the market. Analysts say this move is going to have an impact on the fiscal deficit target and may move it up to 3.5% from the present 3.2%.

Aditi Nayar, an economist at ICRA, the Indian arm of rating agency Moody’s, said the additional borrowing could lead to “modest fiscal slippage” as the government was likely to miss its revenue receipts target.
“Given the clouded outlook for revenues, sticking to the fiscal consolidation roadmap would entail compression of expenditure, which would dampen the expected economic growth recovery in March quarter,” Aditi Nayar told Reuters.

However, the Finance Ministry said that there will be no change in the net borrowing as envisaged in the Budget for 2017-18. Meanwhile, NITI Aayog Vice Chairman Rajiv Kumar said that there was no harm in missing the fiscal deficit target.

The government had borrowed Rs 3.72 lakh crore in the first half of the fiscal year 2017-18 and had pegged Rs 2.08 lakh crore for the second half. Earlier in the day, it was reported that the government has estimated a tax revenue shortfall of Rs 55,000 crore for the fiscal year 2017-2018 and may consider breaching the fiscal deficit target by 20 basis points. For the current fiscal, the government has estimated a direct tax revenue shortfall Rs 20,000 crore and an indirect tax revenue shortfall Rs 25,000 crore- 35,000 crore.

The government has fixed fiscal deficit target to 3.2% of the GDP in the current fiscal as against 3.5% in 2016-17.  In absolute terms, 3.2% deficit for the current fiscal works out to nearly Rs 5.47 crore. The fiscal deficit at the end of October hit 96.1% of the Budget, with five more months still at hand. Meanwhile, the GST collections also slowed down for two consecutive months due to the rate rationalisation of over 170 goods and services.

via Government may breach 3.2% fiscal deficit target for first time in four years; here’s why – The Financial Express

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