India’s fiscal deficit crosses 103.9% of full year target in April-October

India on November 30 reported a fiscal deficit of Rs 6.48 lakh crore during April-October, which translates to 103.9 percent of its full-year target, government data showed.

The government has pegged fiscal deficit target -- a measure of how much the government borrows in a year to meet part of its spending needs -- at 3.3 percent of Gross Domestic Product (GDP) for the financial year 2018-19.

At the end of the last financial year 2017-18, the fiscal deficit was 96.1 percent of the budgeted estimates.

“The extent of a potential fiscal slippage in 2018-2019 would be driven by the likelihood of meeting the targets for GST, excise duty, dividends and profits, and disinvestment, and the adequacy of outlays for revised MSPs, the NHPS, fuel and other subsidies. Notwithstanding fears of a potential fiscal slippage in 2018-2019, the announcement of OMO purchases by the RBI in December 2018 and the decline in crude oil prices would keep a check on G-sec yields in the immediate term,” Aditi Nayar, Principal Economist at ICRA said.

Revenue receipts were Rs 7.88 lakh crore or 45.7 percent of budgeted estimates, lower than 48.1 percent during the same period last year, mainly due to lower tax collection

Tax revenue was Rs 66.11 lakh crore or 44.7 percent of the target, while non-tax revenue collection witnessed a jump to 52.1 percent of the target from 33 percent a year ago.

While the direct tax collection continues to be robust this year, the government may miss the indirect tax mop-up target.

“The uptick in the headline GST collections in October 2018, is likely to have been led by quarter-end adjustments. It remains to be seen whether the GST collections continue to exceed Rs 1 trillion (Rs 1 lakh crore) in the remainder of FY2019, particularly in the festive months, despite the recent GST rate cuts,” Nayar said.

Total expenditure was Rs 24.42 lakh crore or 59.6 percent of the budgeted estimate, as compared with 61.5 percent during the same time a year ago.

While the finance ministry has time and again maintained that the government will meet its fiscal deficit target of 3.3 percent of GDP, it will be contingent on realisation of disinvestment target of Rs 80,000 crore and higher GST collections, Care Ratings said.