India has overshot its deficit target halfway into the year

India's fiscal deficit at the end of October was ₹7.20 lakh crore — that's a little more than what it had aimed for at the end of March 2019.

Fiscal deficit is the amount of money spent by the government over and above its earnings. The government had set itself a target of 3.3% in the latest budget in July 2019, after the Narendra Modi government was reelected in May.

However, at this stage, it seems that the government's finances will stretched more than it wanted to partly because of slowing economic growth that has led to fall in tax revenues particularly the collection of Goods and Services Tax.

Moody's had recently projected that the India's full-year fiscal deficit may be 3.7% of GDP (Gross Domestic Product) or in other words the national income.

The higher the fiscal deficit, the more weaker the rupee gets. Rise in fiscal deficit can also increase the government's borrowing expensive. Fiscal deficit is a measure of how prudently the government manages its finances.

The deficit can be controlled either by reducing expenses or boosting income in the remaining months of the year. But as it seems right now, the economic growth in the second quarter of the year i.e. between July and September may fall below 5%, according to many estimates. That would be mean a further fall in tax revenue and wider-than-expected deficit.



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