Budget 2020: Fiscal consolidation hinges on revenue, says Aditi Nayar

The Union Budget 2020-21 has aimed at reducing the fiscal deficit to 3.5 per cent of the GDP in the coming fiscal year from 3.8 per cent of the GDP included in the Revised Estimates (RE) for 2019-20, which appears challenging.

Although, a gross tax revenue expansion of 12 per cent seems reasonable in light of the 10 per cent growth expected in the nominal GDP in FY20-21, the revenue assumptions made for FY20 seem aggressive. In particular, the government’s gross tax revenues are effectively forecast in the FY20 RE to expand by 19 per cent in Q4FY20, relative to