Fiscal deficit widens to 4.6% of GDP in 2019-20 – The Economic Times

Clipped from: https://economictimes.indiatimes.com

As per CGA data, the FY20 fiscal deficit worked out to be 4.59% of the GDP, while the revenue deficit was 3.27%.

NEW DELHI: India’s fiscal deficit widened to 4.59% of gross domestic product (GDP) for the previous fiscal, overshooting the government’s revised target of 3.8%, official data released on Friday showed.

The fiscal deficit for April reached 35.1% of the FY21 target of Rs 7.96 lakh crore due to lower revenue, which was hit hard as economic activity stalled after the lockdown was imposed to contain the spread of Covid-19.

The government’s net tax revenue stood at Rs 21,412 crore in April revealing a massive 70% decline as against Rs 71,637 crore in April last year.

The fiscal deficit, or the gap between the government’s revenue and expenditure, came in at Rs 9.35 lakh crore in March, which was 22% higher than the targeted Rs 7.66 lakh crore.

Finance minister Nirmala Sitharaman had invoked the escape clause in the Fiscal Responsibility and Budget Management Act to peg the deficit 0.5% higher than budgeted.

Analysts said missing the revised target could lead to a spike in bond yields.

“With a considerable revenue shortfall and limited expenditure compression, the Government of India’s fiscal deficit overshot its revised estimates by a massive Rs. 1.7 trillion, taking the deficit for FY2020 to 4.6% of GDP, which is expected to contribute to a spike in G-sec yields,” said Aditi Nayar, principal economist at ICRA.

16

The government’s tax revenue remained subdued throughout the financial year as the economy slowed. For the previous financial year, the government’s total revenue stood at Rs 17.5 lakh crore, about 10% short of the budgeted Rs 19.31 lakh crore.

On the other hand, expenditure for the FY20 was at Rs 26.86 lakh crore or 99.5% of the target.

Future Tense
The government had penciled the deficit at 3.5% of GDP in the FY21 budget estimate released in February. However, experts have pegged it at around 6%-7% to account for the Covid-19 outbreak and lockdown impact.

While the sharp decline in economic activity is expected to severely curtail revenue, the government’s expenditure is likely to expand owing to relief and stimulus measures.

“Based on the anticipated compression in consumption and income levels following the Covid-19 pandemic, and building in the gain to the Government of India from the hikes in excise duty on fuels, ICRA expects the net tax revenues of the Central Government to fall short of the FY2021 BE by Rs. 3.3 trillion,” Nayar said.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s