NEW DELHI: The government is likely to relax fiscal deficit targets for the next budget. Top officials said that with elaborate plans being shaped up for an expenditure push to try and overcome the current economic slowdown, the government may relax fiscal deficit targets for FY2020-2021, which are supposed to be three per cent of gross domestic product (GDP) to 3.2 per cent or so.
Top officials said even as the government is looking at an expenditure push, the fact is that there were little chances of raising tax collections significantly, given the fact that the government had already slashed the corporate tax. “Under these circumstances, it may become an imperative to temporarily pause the glide path envisaged by the FRBM Act,” they said.
According to the officials, the fiscal deficit for this year is likely to overshoot the target of 3.3 per cent and may go up to 3.5 -3.6 per cent. “We are likely to end the year with lower corporate tax collections as well as lower GST collections. This gap is unlikely to be bridged by the snips in expenditure in the last quarter that we are deciding on currently,” revenue department top brass said.
Tax collections are expected to be better in FY2020-21, but officials pointed out that with the huge cut in corporate tax rates and the slowdown persisting in the economy the chances for double-digit increase tax collections over the 2019-2020 budget estimates were not very bright.
As the government’s fiscal deficit is the suspect besides public borrowing, the centre has for the last several years been indulging in off-budget borrowings through the Food Corporation of India and the Fertiliser Corporation of India. The International Monetary Fund in a report on its consultations with India has earlier this week flagged the fact that though the Union government has targeted a fiscal deficit of 3.3 per cent, the total public sector borrowing may well be nearer 8.5 per cent.