India deficit may grow to 6.8%
Low economic activity and lower tax collections cited
With economic disruptions set for a long haul due to Covid-19 pandemic, India could see its fiscal deficit this year to balloon to over 6.8 per cent of Gross Domestic Product (GDP), brokerages analysing the first quarter deficit numbers have said.
The Controller General of Accounts on Friday said that country’s fiscal deficit has expanded to 83 per cent of Budget Estimate in the April-June quarter primarily due to lower tax collection and higher expenditure for Covid-19 relief.
Expanded expenditure
According to a report on Indian economy by Emkay Global Financial Services, low economic activity and lower tax collections coupled with expanded expenditure in schemes like the Mahatma Gandhi Rural Employment Guarantee Act (MGNREGA), PM-KISAN and extension of Pradhan Mantri Garib Kalyan Yojana (PMGKY) until November has created a scenario
where the deficit would widen.
The current expansion (in deficit), the brokerage said, is primarily due to low economic activity in the last two months and an extension of the tax filing deadline to August 20.
“Capital spending has surged 40 per cent due to ways and means advances for FCI (high procurement) and road spending; excluding these two, spending has declined by 4 per cent,” Emkay said.