Budget 2020: Fiscal deficit pegged at 3.8%, in line with street estimates

Finance Minister Nirmala Sitharaman on February 1 said the fiscal deficit target for current financial year 2019-20 would be at 3.8 percent of the Gross Domestic Product.

This was against 3.3 percent estimated by the government earlier but is in line with analyst expectations.

For the financial year 2020-21, the fiscal deficit target has been set at 3.5 percent.

Analysts were expecting the fiscal expansion in the range of 3.5-3.8 percent, considering the government's focus on improving economy that slowed down to 4.5 percent in Q2FY20.

In the run up to the Budget, Rajat Jain, CIO at Principal Mutual Fund, had told Moneycontrol that government would not be able to meet the fiscal deficit target. "We feel market would be comfortable at 3.7-3.8 percent levels of fiscal deficit," he said.

Deepthi Mathew, Economist at Geojit Financial Services, had also said the fiscal deficit target of 3.3 percent was too ambitious.

"The market expects the fiscal deficit to settle in the range of 3.5-3.8 percent. It is also expected that the upcoming budget will witness a move from fiscal prudence to fiscal profligacy, with the fiscal deficit target at a higher range," she added.

"The government has used FRBM trigger mechanism for fiscal deficit deviation and has undertaken deviation of 0.5 percent for FY20 fiscal deficit," Sitharaman said.