NEW DELHI: After missing the fiscal deficit target for the third straight year, meeting the 3.5 per cent target this fiscal will also be too ambitious, if not impossible, for the Central government, considering the stagnant tax collection and no visible signs of an economic turnaround.
Union Finance Minister Nirmala Sitharaman has revised the fiscal deficit for FY 2019-20 from estimated 3.3 per cent to 3.8 per cent in the budget, and has set the fiscal deficit target for the coming fiscal starting April 1 at 3.5 per cent.
"In the last three months, we have seen an increase in collection. I hope there will be improvement in the revenue generation," Sitharaman said, defending her financial goals during the media interaction post budget presentation.
However, the government has missed the revenue target, as tax shortfall is estimated this year at Rs 3 lakh crore, mainly on account of corporate tax cut, and revenue is expected to grow at modest rate of 12 per cent next fiscal year.
With additional exemption in personal income tax and the abolishment of dividend distribution tax, together it will cost the government a revenue loss to the tune of Rs 70,000 crore. In this context, with subdued revenue targets and increased expenditure, fiscal management seems to be on a shaky ground, a fact already mentioned in the economic survey.
"The year 2020-21 is expected to pose challenges on the fiscal front. While on one hand the outlook for global growth persists to be weak, with escalated trade tensions adding to the risk; on the other hand, the pace of recovery of growth will have implications for revenue collections," Chief Economic Advisor Arvind Subramanian had warned a day before budget.
The Centre fears a deficit of nearly Rs 40,000 crore in GST collections as compared to what it had budgeted for 2019-20. While the government has set ambitious divestment targets at Rs 2.1 lakh crore, doubts are raised given the fact government has already missed the target this year.
"High growth in non-tax revenue may not be sustainable year after year. The realisation from non-tax revenue and disinvestment being uncertain adds to the volatility in revenue projection," the economic survey had warned.
Missed target
The Centre has missed the revenue target, as tax shortfall is estimated this year at Rs 3 lakh crore, mainly on account of corporate tax cuts. Revenue is expected to grow at a modest rate of 12 per cent next fiscal year.