Economy

Fiscal deficit touches 135% of Revised Estimates during April-Feb

Our Bureau New Delhi | Updated on March 31, 2020 Published on March 31, 2020

Fiscal deficit is the difference between government’s earning and expenditure   -  Getty Images/istock.com

The Controller General of Accounts (CGA), the government’s book-keeper, on Tuesday reported that fiscal deficit for the first 11 months of the current fiscal has reached 135 per cent of the revised estimate.

Fiscal deficit is the difference between income and expenditure of the government. The Budget, presented in July last year, estimated this deficit at ₹7.03-lakh crore or 3.3 per cent of GDP which was later revised to ₹7.66-lakh crore or 3.8 per cent of the GDP.

 

 

According to the CGA data, the fiscal deficit touched ₹10.36-lakh crore during 11 months.

Aditi Nayar, Principal Economist with ICRA, said that the sharp 21.7 per cent increase in the deficit of the ₹8.5-lakh crore during 11 months of 2018-19 was primarily driven by the subdued 2 per cent growth in net tax revenues.

In terms of percentage, the deficit this fiscal was similar to 131 per cent of the corresponding period of FY19. Now, the big challenge would be to keep the deficit within revised estimate.

A few factors would help to restrain the size of the fiscal deficit in March 2020, including the sharp decline in the amount of central tax devolution to be provided to the States (to an estimated ₹ 953 billion in March 2020 from ₹1.6 trillion in March 2019), the hike of duties on petrol and diesel announced in the middle of March, a likely write back in food subsidy (offset by transfer of funds from the NSSF to FCI), and the typical accumulation of direct tax collections in the year-ending month.

Moreover, According to Nayar, the Centre’s revenue expenditure would need to more than double in March 2020 to meet the FY2020 RE of ₹23.5 trillion. Accordingly, further saving in expenditure relative to the FY2020 RE appears likely.

“ICRA estimates that the Centre’s capital expenditure and net lending would need to rise by 29.5 per cent on a YoY basis in March 2020 to meet the RE for FY2020,” she said.

 

Published on March 31, 2020

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