Fiscal deficit for April-February touches 135.2% of Revised Estimates

The Centre’s budget deficit for April-February was 10.36 trillion rupees, or 135.2% of revised estimates (RE) for the whole year, compared to 134.2% for the same period last year. . This is mainly due to increased spending and lower capital revenues.

Data released on Tuesday by the auditor general shows that to meet the BR for 2019-20, the central government will have to raise 5.03 trillion rupees in total revenue in March. The month saw the worst phase of the Covid-19 pandemic so far, and the resulting lock-in.

Unless a highly unlikely scenario of massive spending cuts is realized, the Center should miss the revised budget deficit target of 3.8% of gross domestic product (GDP) for 2019-20.

Already, the Ministry of Finance ended the disinvestment of the year with a product of Rs 50,298.6 crore, a deficit of Rs 14,701 crore compared to the revised estimates of Rs 65,000 crore.

Meanwhile, the income tax department is expected to experience a deficit of about 1.5 trillion rupees in direct taxes for the year, the highest in two decades.

“A further shift in the budget deficit ratio cannot be ruled out because the budget deficit will be higher and GDP (the denominator) will be lower due to weaker GDP growth in the fourth quarter. Depending on how the government manages spending, there could be another 0.5% slippage in the budget deficit ratio, “said Madan Sabnavis, chief economist at Care Ratings.

A 0.5% shift would bring the fiscal deficit for 2010 to 4.3% of GDP.

Sabnavis said that due to the epidemic there has already been a 1.7 trillion rupee fiscal stimulus package and further fiscal stimulus can be expected.

“Some factors would help limit the size of the budget deficit in March 2020, in particular the sharp drop in the amount of central fiscal deconcentration to be provided to States (to around 953 billion rupees in March 2020 compared to 1.6 trillion rupees in March 2019), the increase in duties on gasoline and diesel announced in the middle of the month, and a likely resumption of food subsidies, “said Aditi Nayar, senior economist, ICRA. She added that further spending savings are likely.

“In our opinion, the relevance of the growth assumptions for revenue and expenditure issued in the Union and in the different state budgets for financial year 21 has considerably diminished following the rapid escalation of the current crisis,” said Nayar.

Nayar said that the loss of economic activity should dampen tax collections in April-June and that spending could increase sharply.

This is particularly true if additional stimulus programs are planned to mitigate the impact of the current crisis on livelihoods and economic activity.

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