would provide better insight into further measures the government would take to spur growth, so it felt it appropriate to pause at this juncture.
The government projected its fiscal deficit at 3.8 per cent for FY20 against the Budget Estimates (BE) of 3.3 per cent, and 3.5 per cent for FY21 against 3 per cent given in the papers under the FRBM Act.
The government had to cut its expenditure by Rs 87,757 crore compared to BE for 2019-20 as tax revenues fell short by close to Rs 3 trillion and disinvestment receipts by close to Rs 35,000 crore. Some part of the revenue shortfall was met by higher non-tax revenue of Rs 32,000 crore, pushed up by a capital transfer from the central bank to the government of over Rs 1.76 trillion.
“The deviation of 0.5 per cent on account of unanticipated fiscal implications looks reasonable. The task of coming back to the consolidation will be easy in case there is an improvement in tax buoyancy,” Abhishek Rastogi, partner at Khaitan & Co, said.
He said the finance minister announced various measures to improve tax buoyancy such as an improvement in compliance, an amnesty scheme for direct taxes and harsh provisions for tax frauds.
The fiscal deficit is pegged at Rs 7.96 trillion for FY21 against Rs 7.66 trillion in the Revised Estimates for the current fiscal year. However, the government will borrow Rs 5.44 trillion, net of repayments, from the market next fiscal year against Rs 4.73 trillion in the current fiscal year. The rest of the finances will come from the other sources such as the National Small Savings Fund (NSSF).
This has been the widest deviation from the fiscal deficit seen by the Modi government in its seven Budgets so far. However, successive governments before him have also failed to rein in fiscal deficit at three per cent of GDP.
The target of three per cent was originally scheduled for 2007-08, but it was deferred by a year at the time. Then 2008-09 saw the ripple effects of the global financial meltdown, forcing the government to offer a stimulus to the tune of Rs 1.8 trillion. That widened the fiscal deficit to over six per cent from 2.5 per cent estimated at the stage of BE that time.
After that, three per cent was targeted many times, but it has never been achieved.
In fact, papers laid on the table of the House under the FRBM Act do not even talk of fiscal deficit at three per cent till 2022-23.