Fiscal deficit shoots up to 135% of target

Public spending looks encouraging, may spur economic activity, help India exit recession in Q4: ICRA

India’s fiscal deficit shot up to 135.1% of the Budget target of nearly ₹8 lakh crore for 2020-21, in the 8 months from April to November 2020, as per data released by the Controller General of Accounts on Thursday. The figure had stood at 114.8% a year earlier.

Revenue deficit, which had crossed 125% in the first half of the year, almost touched 140% of the Budget target by November, with just about 40% of the annual estimated revenue receipts coming in. The fiscal deficit had reached 120% of the year’s target, or ₹9.53 lakh crore by the end of October. It rose to ₹10.8 lakh crore in November.

Government spending, including capital expenditure considered critical to revive the economy, remained lower than a year earlier, though there was a month-on-month uptick in November.

Only 62.7% of the budgeted expenditure for the year had been spent by November, lower than the 65.3% recorded a year earlier. Capital expenditure fared even worse, touching 58.5% of target by November, compared to 63.3%. “With four months to go in the year, a lot depends on how the government manages its expenditure,” said Madan Sabnavis, chief economist at CARE Ratings. “If all the allocations mentioned in the Atmanirbhar programmes are executed, then fiscal deficit will increase to around 9% of GDP — a deficit of around ₹17-18 lakh crore.” ICRA principal economist Aditi Nayar said the fiscal deficit for the year will reach ₹14.5 lakh crore or 7.5% of its nominal GDP estimate; she saw some encouragement from public spending in November.

Monthly outgo expanded year-on-year by “32% for revenue expenditure and nearly 250% on a small base for capital expenditure. A sustenance of this trend will bolster economic activity, and help the Indian economy exit the recession in the coming quarter,” she said.

Mr. Sabnavis said higher government spending was seen in the health and consumer affairs Ministries, but several allocations announced may not finally be invoked this year, which can lower the deficit by ₹1 lakh-₹2 lakh crore. “We do not expect compensations on the revenue side where tax revenue at best is maintaining the monthly target.”

Lower receipts to blame

Sunil Kumar Sinha, principal economist at India Ratings and Research — which expects FY21 fiscal deficit at 7% of GDP: “The expenditure pattern suggests that expansion in fiscal deficit is not due to increased expenditure which has been muted so far. The higher fiscal deficit is primarily originating from lower receipts.”

Corporate tax collections were ₹1.03 lakh crore lower year-on-year and income tax collections were down ₹33,000 crore. Non-tax revenue has also been lower so far at just about 32% of budgeted amount, Mr. Sabnavis pointed out.

You have reached your limit for free articles this month.

Subscription Benefits Include

Today’s Paper

Find mobile-friendly version of articles from the day’s newspaper in one easy-to-read list.

Unlimited Access

Enjoy reading as many articles as you wish without any limitations.

Personalised recommendations

A select list of articles that match your interests and tastes.

Faster pages

Move smoothly between articles as our pages load instantly.


A one-stop-shop for seeing the latest updates, and managing your preferences.


We brief you on the latest and most important developments, three times a day.

Support Quality Journalism.

*Our Digital Subscription plans do not currently include the e-paper, crossword and print.


Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.