India’s fiscal deficit at 135% of the budget in Feb

The data released by the Controller General of Accounts showed that the country’s fiscal deficit in February was 135.2% of the revised estimate for the fiscal year 2019-20. This amounted to Rs 10.36 lakh crore against the revised estimate of Rs 7.67 lakh crore in the budget presented in February. In February 2018-19, the nation’s fiscal deficit was 134.2% of the annual target.

 In her budget speech for FY21, Finance Minister Shrimati Nirmala Sitharaman had raised the fiscal deficit target for FY20 to 3.8% of the GDP. This is due to an estimated fall in revenue following a cut in corporate tax rate. The government had banked on the escape clause in the Fiscal Responsibility and Budget Management Act to expand the fiscal deficit target.

“A few factors would help to restrain the size of the fiscal deficit in March 2020, including the sharp decline in the amount of central tax devolution to be provided to states, the enhancement of duties on petrol and diesel announced in the middle of the month, a likely write back in food subsidy (offset by transfer of funds from the National Small Savings Fund to Food Corporation of India), and the typical accumulation of direct tax collections in the year-ending month,” stated Aditi Nayar, principal economist of rating agency ICRA.