NEW DELHI: The government’s fiscal deficit target, which has already been breached at 3.4 per cent, is likely to slip further by another 0.1 per cent this financial year, on account of lesser-than-expected GST collection and slippage in divestment targets.
Interim Finance Minister Piyush Goyal, while presenting the Interim Budget for 2019-20 on Friday, had revised fiscal deficit target for this fiscal from the budgeted 3.3 per cent to 3.4 per cent. However, sources in the finance ministry claimed that even after the final revision, the deficit may go up by another 0.1 per cent, owing to slippage in tax collection and divestment targets.
“The revenue collection (indirect taxes) had been a real dampener. While direct taxes have seen an upsurge, GST collections remained below average, thanks to poor compliance, which may disturb the fiscal math. Any further slippage, especially on divestment part, would lead to another slippage by 0.1 per cent, which would become more clear when the new government presents its first budget,” a senior finance ministry official told this paper.
Despite various schemes and better-than-expected direct tax collection, the shortfall in GST revenue by an estimated Rs 1 lakh crore has forced the government to revise its Gross Tax Revenue target downwards by over Rs 23,066 crore.
As per the Interim Budget, the government has revised the GST target from Rs 7.44 lakh crore to Rs 6.44 lakh crore, which insiders say is still difficult to achieve. Total indirect taxes, including customs and other duties, are estimated to be Rs 10.45 lakh crore, down from Rs 11.18 lakh crore. The net borrowing was revised to Rs 4.47 trillion from Rs 4.07 trillion in the revised estimates for FY19.
The farmers’ scheme, being introduced with retrospective effect with Rs 20,000 crore worth income transfer budgeted for the ongoing fiscal year, could add to the pressure.
This would be the second successive year that the government would be missing the fiscal deficit target. For the next fiscal, the deficit has been pegged at 3.4 per cent of the GDP, up from 3.1 per cent as per the fiscal consolidation roadmap outlined earlier. However, with an additional budget of Rs 75,000 crore for farmers’ scheme, additional income tax rebate and downward revision of GST targets, experts are skeptic towards achieving this figure.
In its commentary on Friday, Moody’s Investors Service said the government would face challenges in meeting the 3.4 per cent fiscal deficit target in the next fiscal, which does not bode well for medium-term fiscal consolidation. “The credibility of this target is now in question,” says Nomura.
What numbers say
This would be the second successive year that the government would be missing the fiscal deficit target
The fiscal deficit for next year has been pegged at 3.4 per cent of the GDP
The farmers’ scheme, with I20,000 crore income transfer budgeted for the ongoing fiscal, could add to the government’s fiscal pressure
Rs 23,066 cr revised Gross Tax Revenue target
Rs 6.44 L cr is the revised GST target, which was I7.44 lakh crore earlier
Rs 10.45 L cr is estimated to what total indirect taxes will be worth