3.3% fis­cal deficit tar­get for FY19 likely to be breached, say ex­perts

Hindustan Times ST (Jaipur) - - World - Press Trust of In­dia feed­[email protected]

NEWDELHI: Meet­ing the fis­cal deficit tar­get of 3.3% of GDP for the cur­rent fis­cal could be a chal­lenge for the gov­ern­ment, given the short­fall in GST col­lec­tions, ris­ing ex­pen­di­ture and slow­ing fac­tory out­put, say ex­perts.

More­over, some pop­ulist an­nounce­ments by the gov­ern­ment to woo vot­ers ahead of gen­eral elec­tions would make the task of achiev­ing the fis­cal deficit tar­get even more daunt­ing.

Some of the ex­perts have al­ready pro­jected that the fis­cal deficit could rise to 3.5% of the GDP, more than the bud­get es­ti­mate of 3.3% of the GDP for the cur­rent fis­cal.

The gov­ern­ment’s fis­cal deficit touched 114.8% of the full-year es­ti­mates at the end of Novem­ber.

The gov­ern­ment had bud­geted fis­cal deficit of ₹6.24 lakh crore, or 3.3% of the GDP, for FY19. Fis­cal deficit for April-novem­ber stood at ₹7.16 lakh crore, or 114.8% of the tar­get. It is slightly more than the 112% recorded in the same pe­riod last fis­cal.

The pres­sure on gov­ern­ment fi­nances is mainly aris­ing from in­di­rect taxes and non-tax rev­enue side - par­tic­u­larly dis­in­vest­ment.

“As a re­sult of rev­enue short­falls from GST col­lec­tions, lower ex­cise duty and below tar­get dis­in­vest­ment re­ceipts, we ex­pect the cen­tral gov­ern­ment fis­cal deficit tar­get to slip to about 3.4% of GDP.

“In­creased ex­pen­di­ture on sub­si­dies or in­come trans­fers to farm­ers would make achiev­ing the bud­geted fis­cal deficit tar­get even more chal­leng­ing, par­tic­u­larly given these rev­enue con­straints,” Moody’s In­vestors Ser­vice vice pres­i­dent, Sov­er­eign Risk Group Wil­liam Fos­ter told PTI.

In­creased ex­pen­di­ture on farm loan waivers or other forms of sub­si­dies would weigh fur­ther on gov­ern­ment fi­nances, he added.

Ex­perts also feel that de­vi­a­tion from the tar­geted num­ber for the sec­ond con­sec­u­tive year in a row may not go well with the rat­ing agen­cies.

As per In­dia Rat­ings and Re­search, the slip­page in cen­tral gov­ern­ment’s fis­cal deficit in 2018-19 is likely to be ₹39,900 crore.

“Fis­cal deficit in FY19 is es­ti­mated to be ₹6.67 tril­lion as against the bud­geted ₹6.24 tril­lion [FY18 (re­vised es­ti­mate): ₹5.92 tril­lion]. This trans­lates into fis­cal deficit/gdp of 3.5% for FY19 com­pared to the bud­geted es­ti­mate of 3.3%. This means that FY19 will be the third con­sec­u­tive year in which fis­cal deficit/gdp will be 3.5%,” it said.

Crisil chief econ­o­mist D K Joshi also pointed out that there is pres­sure on fis­cal deficit even though there is some re­lief from crude oil front.

“If the rev­enue doesn’t match the ex­pen­di­ture, it would be a chal­lenge to meet fis­cal deficit tar­get,” Joshi said.

Slow­down in rev­enue col­lec­tion, mod­er­a­tion in fac­tory out­put and tight liq­uid­ity sit­u­a­tion are putting pres­sure on fis­cal deficit, L&T Fi­nan­cial Ser­vices group chief econ­o­mist Rupa Rege Nit­sure said.

As per In­dia Rat­ings and Re­search, the slip­page in cen­tral gov­ern­ment’s fis­cal deficit in 2018-19 is likely to be ₹39,900 crore.

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