New Delhi: Despite Finance Ministry’s efforts, India is set to miss its fiscal deficit target for the year ending March 2019, India Ratings and Research said on November 26. Lower than targeted disinvestment proceeds and a shortfall in revenues are the prime reasons responsible for India’s widening fiscal deficit. Even though India’s fiscal deficit target for 2019 was pegged at 3.3 percent of its Gross Domestic Product (GDP) or Rs 6.24 trillion, but the ratings agency estimated fiscal deficit at 6.67 trillion or 3.5 percent of GDP.
A note released by the firm said, “The pressure on government finances is mainly arising from the revenue side, particularly from indirect taxes and non-tax revenue.”
Lower than expected GST collection dealt a blow
According to India Ratings, aggregate indirect tax collections grew only 4.3 percent in the first half of the year compared with a targeted growth of 22.2 percent for the full year even though reforms targeted to plug leakages in GST collections were introduced. One of the major blows was dealt by GST collection for this year, which was 98 percent of the budgeted target.
The abrupt roll-out of GST last year had spawned a lot of uncertainty around revenue collections. Even though collection improved over time, GST still got a muted response from businesses.
Chasing the big divestment target
Even as the government is going for a fourth tranche of Central Public Sector Enterprise (CPSE) Exchange Traded Fund (ETF), it is likely to miss the tall target of Rs 80,000 crore that it set for itself in the current fiscal, India Ratings said. Till the end of October, the government had only managed to raise Rs 15,247.11 crores.
“By reducing capital expenditure, the government will again try to reduce the adverse impact of both increased revenue expenditure and shortfall in receipts on the fiscal deficit,” the rating agency said.