As coronavirus forces lockdown, govt's budgetary targets go for a toss

The central government has set aside its fiscal targets as parts of India have entered an unprecedented deadlock due to the COVID-19 pandemic.

The revised budget deficit target for 2019-2020, of 3.8% of gross domestic product, will not be reached due to an expected deficit in tax revenues and divestments, as the economy comes to a standstill.

In fact, the divestment deficit could reach 15,000 crore rupees, compared to revised estimates of 65,000 crore rupees, Business Standard learned.

Even for the coming year, the Center expects divestment and tax revenues to be affected for the quarter from April to June. No one in government makes predictions beyond that, given the constantly changing situation.

“We are not even thinking about budget targets now. Everything that can be done for March will be done. Also for the first quarter (April-June), the outlook does not look as good. There is still no clarity beyond that, “said a senior government official. The official confirmed that the budget deficit target is likely to be missed.

“The government’s objective, in terms of divestment, is to withdraw money from transactions made. No new transactions are underway, “said a second government official.

This means that the planned initial public offering of IRFC and the planned sale of Rs 8,000 crores of the Centre’s stake in ITC and Axis Bank via Specified Undertaking of Unit Trust of India have been suspended. The only product the Center will obtain will come from the acquisition of THDC and NEEPCO by NTPC and from a few buyouts. Under the old agreement, the Center expects around Rs 12,000 crore.

“We will receive around 50,000 to 51,000 crores of Rs,” said the second official.

According to sources, the planned strategic sales of Air India, Bharat Petroleum, Container Corp and Shipping Corp would also be delayed. All work on these seems to have stopped now. “When the Indian and global economic situation improves, and no one knows when it will, these processes will resume,” said the chief official.

The stock market collapsed on Monday as stocks plummeted after India was blocked to contain the spread of the COVID-19 pandemic. In the first transactions, trading was again interrupted for 45 minutes, the Sensex having reached a lower circuit limit of 10%. The sale continued when trade resumed. It was the second break in trading on the Indian market in 10 days. On March 13, Nifty touched down in the opening deals for the first time since May 2009.

Officials said there had been no official word or indication from the top yet. The expectation of public servants is to do what they can, but it is understood that all budgetary and budgetary objectives no longer matter.

Earlier this month, it was reported that the collection of withholding tax paid by private companies had dropped by more than 10% between April 15, 2019 and March 15, 2019. This drop, after the due date of the fourth tranche, which ended on March 15, could result in a shortfall of at least Rs 35,000 crores in total direct tax revenue for the current year.

Even the tax settlement system, Vivaad Se Vishwas, may not help consolidate the coffers due to the COVID-19 pandemic that interrupted all awareness programs in the Income Tax Department.

Given the slowdown in demand and consumption in all sectors even before the pandemic, the Minister of Finance, Nirmala Sitharaman, had, in his speech on the budget for the Union 2020-2021, invoked the escape clauses of the law on financial responsibility and budgetary management to revise the 2019-2020 budget deficit target. at 3.8% of GDP, against 3.3%. For 2020-2021, the target is 3.5%.

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