With just three months left to close the fiscal, it’s becoming certain that the shortfall in revenue collections would be about Rs 4 lakh crore in FY21. Even though advance tax collections during the December quarter reportedly fared better than the September quarter, the overall direct tax revenue alone is likely to witness a shortfall of over Rs 3 lakh crore, according to multiple estimates.
The FY21 budget target for direct tax collections stood at Rs 13.19 lakh crore, but going by preliminary estimates, the final mop up is expected to settle somewhere around Rs 9 lakh crore. As of October, direct tax collections stood at Rs 5.89 lakh crore or 45 per cent of the target, net of refunds.
Last year during the same period, they stood at Rs 6.75 lakh crore. Similarly, between April and October, overall revenue collections stood lower at Rs 7.34 lakh crore, or 34 per cent of the budgeted amount as against 46.2 per cent last year.
According to SBI Research, net revenue collections may fall below budget estimates by Rs 3.8 lakh crore, after adjusting for gains from duty hike and DA freeze. This includes the anticipated shortfall in net tax revenue of Rs 3 lakh crore, followed by shortfall in non-tax revenue of Rs 1.3 lakh crore. Similarly, shortfall in disinvestment receipts is pegged at about Rs 1.6 lakh crore.
“For full year FY21, based on budget estimate nominal GDP calculations, total expenditure would have fallen by 1 per cent of GDP and revenues by a steep 8 per cent. However, the full year math is somewhat saved by a collapse in nominal GDP...a combination of weaker revenues — tax collections (direct and indirect while excise duties fare better) as well as non-tax (disinvestments) and a modest increase in total expenditure primarily revenue spending, while capex is scaled back,” noted DBS.
Gross borrowings have been pegged at Rs 12 lakh crore in FY21, but analysts expect the government to face some upside of Rs 1-1.5 lakh crore during the March quarter when the strength in annual revenues becomes clearer.
Assuming an expenditure rationalization of Rs 50,000 to Rs 80,000 crore and additional spending due to various stimulus packages totalling Rs 4.5 lakh crore, fiscal deficit is expected to be Rs 15.5-15.8 lakh crore or 7.8-8 per cent of GDP during the financial year ending March.