Centre's FY20 fiscal deficit target may touch 3.5-3.8%: Report

More bad news for the economy may be in store as the Centre is unlikely to meet its budgeted fiscal deficit target of 3.3 percent of GDP for FY20, which may now rise to 3.5-3.8 percent, reports Business Standard.

The Budget team, headed by Finance Minister Nirmala Sitharaman, would decide on a course of action after advance tax numbers are released later in December, it added.

Moneycontrol could not independently verify the report.

The fiscal deficit target for FY20 is Rs 7.04 lakh crore. As of October-end, the fiscal deficit stood at 102.4 percent of this target. To achieve the 3.3 percent target, nominal GDP has to grow at 12 percent of GDP, a tough ask given that GDP growth in Q2 came in at 6 percent (April-June 8 percent).

So assuming that the FY20 fiscal deficit remains at Rs 7.04 lakh crore, in percentage terms it will shoot up to around 3.5 percent.

Despite this, the Centre would try to keep the slippage within limits of the Fiscal Responsibility and Budget Management (FRBM) Act. The Act, after its 2018 amendment, allows fiscal deficit slippage of 0.5 percent for any given year, if there are justifications -- such as war, national security, natural calamities, structural economic reforms, severe collapse in agricultural sector or decline in real output growth of a quarter by at least 3 percentage points below its average of the previous four quarters.

On the revenue front, while divestment and non-tax sources are expected to meet their targets, gross tax receipts would fall short by at least Rs 2 lakh crore.

Another major cause for the deficit is the shortfall in tax collections.

Central GST (CGST) collections missed the mark by 40 percent during April-November standing at Rs 3.3 lakh crore as against the budgeted Rs 5.26 lakh crore, as per data provided by Minister of State for Finance Anurag Singh Thakur in the Lok Sabha.

Direct tax collections after refunds stands at Rs 5.5 lakh crore till November-end. To meet its budgeted tax estimates of Rs 13.35 lakh crore, tax collections would have to surge 31 percent.