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India's Fiscal Deficit May Spike To 6.8 Per Cent Of GDP In FY21: Emkay Global
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India, 4 Aug 2020 8:58 AM GMT
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Lower net revenue receipts and increased expenditure has pushed the fiscal deficit to 83 per cent of budget estimate (BE) in the three month period of April-May.
Amid the ongoing COVID-19 pandemic that has caused massive economic disruptions, India could witness its fiscal deficit this year to rise to over 6.8 per cent of Gross Domestic Product (GDP), Emkay Global Financial Services said on August 3.
The fiscal deficit refers to the total amount by which the government's expenses for a year exceeds its revenues.
The Controller General of Accounts said that country's fiscal deficit has increased to 83 per cent of Budget Estimate in the April-June quarter due to lower tax collection and higher expenditure for COVID-19 relief.
Low economic activity, lower tax collections and expanded expenditure in schemes like Mahatma Gandhi Rural Employment Guarantee Act (MGNREGA), PM-KISAN and extension of Pradhan Mantri Garib Kalyan Yojana (PMGKY) till November, 2020 has compelled the deficit to widen, at least this year.
"Capital spending has surged 40 per cent due to ways and means advances for FCI (high procurement) and road spending (base effect due to low spending in Q1FY19 due to elections); excluding these two, spending has declined by 4 per cent," Emkay said in its report.
Lower net revenue receipts and increased expenditure has pushed the fiscal deficit to 83 per cent of budget estimate (BE) in the three month period of April-May.
Moreover, direct tax collection declined 31 per cent due to deferment in tax filing date, and indirect tax collection fell 34 per cent due to deferment in GST fillings and abnormally low economic activity, the report said.
"We believe that gross tax collection to fall 5.3 per cent yoy in FY21, on a sharp slowdown in the nominal GDP growth. Vivad Se Vishwas scheme has been factored in this assumption. Non-tax revenue collections have also declined by 55 per cent yoy on lower mobilisation of economic receipts," Emkay said, justifying high deficit numbers for this year.
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