The Centre’s fiscal deficit has already reached 83.2 per cent of the Budget Estimate (BE) in the first quarter of 2020-21 against 61 per cent in the year-ago period. However, experts are not unduly worried about the surge.

According to data made public by the Controller General of Accounts (CGA) on Friday, the net tax revenue was just 8 per cent of the BE in Q1, against over 15 per cent in Q1 FY20. Since disinvestment has come to a halt, non-tax revenue was also affected. At the same time, expenditure rose to nearly 27 per cent of the BE while last year it was around 26 per cent.

Anil K Sood, professor and co-founder of the Institute for Advanced Studies in Complex Choices, said the data were unsurprising. “Given the level of contraction in the economy, we do expect the fiscal deficit to be higher this year. It is higher by just ₹2,30,308 crore compared with last,” he said. The deficit is accounted for by a drop in revenue of about ₹100,000 crore and an increase in expenditure of ₹1,30,000 crore.

 

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Further, he said, he would not worry about a deficit increase, even if it turns out to be about 2-3 per cent of GDP. “At this stage, it is important to bring back confidence among consumers as well as businesses,” he said.

Revenue collection has fallen but the States’ share in taxes is based on the BE until the Revised Estimates are in place. This has reduced net Central taxes. Also, the expenditure on providing pandemic relief has led to a higher fiscal deficit for Q1, said Devendra Kumar Pant, Chief Economist with India Ratings.

 

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