Fiscal deficit for April-November likely stood at 107% of FY20 target

The Centre’s fiscal deficit for April-November likely stood at 107 per cent of the fiscal year 2019-20 target of Rs 7.04 trillion, said senior government sources. This compares to 114.8 per cent for April-November, 2018-19, and 102.4 per cent till the end of October this year.

The April-November fiscal deficit data will be officially released on December 31.

“At end-November, fiscal deficit is at 107 per cent of the full-year target,” said an official. In absolute terms, that comes to around Rs 7.53 trillion.

This means that for the remaining four months of the fiscal year, the Centre has to initiate a heavy compression of expenditure in order to meet the fiscal deficit target, which has been pegged at 3.3 per cent of GDP. For the first half of the year (April-September), fiscal deficit was at 6.6 per cent of the GDP for that period.

However, as reported earlier, the Narendra Modi government is highly likely to miss its fiscal deficit target for 2019-20. It could be between 3.5 per cent to 3.8 per cent of GDP. A final call on the what it will be, within the 3.5-3.8 per cent range, will be taken by Finance Minister Nirmala Sitharaman and her budget team after the advance tax numbers are available in mid-December.

For the deficit to be 3.3 per cent of GDP, it assumes a nominal GDP growth of 12 per cent in FY20. Officials now concede that nominal GDP growth for the year will nowhere be close to 12 per cent. The nominal GDP growth for April-June was 6 per cent and that for July-September was 6 per cent. With the Reserve Bank of India’s latest forecast of 5 per cent real GDP growth for 2019-20, even a 3 per cent deflator would take nominal GDP growth to around 8 per cent.

That means that theoretically, even if the fiscal deficit for the year is Rs 7.04 trillion, as a percentage of GDP, it will shoot up to around 3.5 per cent. Given the revenue scenario, that seems difficult.

While the divestment target is expected to be met and non-tax revenues could even be exceeded, tax revenues remain a major cause of concern and a shortfall of at least Rs 2 trillion is expected in gross tax revenue.

The central GST collection fell short of the budget estimate by nearly 40 per cent during the April-November period of 2019-20, according to the data presented in Parliament on Monday. The actual CGST collection during April-November stood at Rs 3.3 trillion while the budgeted estimate is of Rs 5.26 trillion for these months, Minister of State for Finance Anurag Singh Thakur said in a written reply in Lok Sabha.

Meanwhile, corporation tax collection contracted by 1 per cent in April-November 2019 compared with the same period last year, amid a slowing economy, even as the impact of the corporation tax rate cuts, announced in September, is yet to reflect in the numbers. Direct tax collection, after adjusting for refunds, touched Rs 5.5 trillion at the end of November and will require a growth rate of 31 per cent in the remaining period to meet the Budget target of Rs 13.35 trillion.