Fiscal deficit crosses FY21 estimates

The Union government’s fiscal deficit overshot the budget target for the current financial year within four months (April-july), mainly on account of the impact of the lockdown on revenue collections.

Stress on revenue resources due to the Covid-19 pandemic continued to reflect on the Centre’s books. For the April-july period, fiscal deficit stood at ~8.21 trillion, or 103 per cent of the 2020-21 budget estimates (BE) of 7.96 trillion. This compares to 77.8 per cent for the same period last year, official data showed on Monday.

In 2019-20, the fiscal deficit had crossed 100 per cent of the full year’s BE by October. With gross domestic product (GDP) data for the April-june quarter also released on

Monday, it can now be calculated that fiscal deficit for the first quarter of

2020-21 came in at 17.4 per cent of nominal GDP.

Finance minister

Nirmala Sitharaman had pegged the fiscal deficit for the year at 3.5 per cent of

GDP in the 2020-21 Union

Budget.

Finance ministry officials admit that the BE no longer holds due to the pandemic and the nationwide lockdown. The government is reluctant to issue fresh estimates for the year, given the uncertainty around the trajectory of the pandemic.

For April-july, tax and non-tax revenues continued getting hit due to slowdown in economic activity. According to data by the Controller General of Accounts, net tax revenue was 12.4 per cent of the FY21 BE compared with 20.5 per cent for the same period last year. Non tax revenue was 6.4 per cent compared to 14 per cent, and non-tax capital receipts, which includes divestment, was 2.4 per cent compared to 14.2 per cent.