The Centre’s fiscal deficit for the first three months of fiscal 2020-21 was ₹6.62 lakh crore, which is 83% of the budgeted target for the year, official data show.
Economists said given the government’s additional borrowing plans, both to meet stimulus spending and bridge the revenue shortfall as a result of the pandemic, the fiscal deficit may end up as high as 8% of GDP, far exceeding the budget’s goal of 3.5%.
The Union government has received ₹1.53 lakh crore (in terms of tax, non-tax revenue and loan recoveries) from April to June. This is less than 7% of budget estimates for the full year.
The Centre’s total expenditure for the quarter was ₹8.15 crore, almost 27% of budget estimates for the year, according to the report published by the Controller General of Accounts on Friday.
The Centre has also transferred ₹1.34 lakh crore to States as their share of taxes, which is ₹14,588 crore lower than the previous year.
“The 83% figure is not surprising because it is using a denominator that has already been exceeded,” said D.K. Srivastava, chief economist with Ernst and Young, and a member of the advisory council to the 15th Finance Commission. “The Centre has already announced plans for additional borrowing that amounts to about 5.7% of GDP, and then on top of that, some more stimulus spending may be undertaken in the latter part of the fiscal year. So I expect that the Centre’s fiscal deficit... might cross even 6.5%,” he added.
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D.K. Pant, chief economist at India Ratings, estimated a fiscal deficit of 7.6%, while Madan Sabnavis, chief economist of CARE Ratings, said it could go as high as 8% of GDP. “When economic activity has been stopped because of the pandemic and lockdown, government revenues are also going to come down,” said Dr. Sabnavis. “We have been noting the positive trade surplus, but when imports are down, customs revenue is also lower. And consumers have also cut down on discretionary spending,” he added.
However, Dr. Srivastava found room for cheer in the 40% growth in the first quarter capital expenditure to Rs. 88,273 crore. “Looking at data for the last 20 years, we find that this is historically high, in terms of year-on-year percentage growth for the first quarter. We have been saying the government should be spending on infrastructure, particularly on construction, and that involves capital expenditure. We find that has been frontloaded, so that is good news,” he said.