The Indian government expects to overshoot its fiscal deficit target by 0.1% of GDP


As expected, the government will breach its fiscal deficit target of 3.3% of GDP for 2018-19. Upon unveiling the government’s interim budget in the Parliament today, the acting Finance Minister Piyush Goyal said that the deficit was expected to be 3.4% of GDP.

This was largely due to the shortfall in tax revenues, higher spending obligations and a sluggish disinvestment programme. That was further exacerbated by farm loan waivers and generous spending on welfare schemes to secure votes.

This comes despite help from the Reserve Bank of India in the form of an interim dividend. In August 2018, the Reserve Bank of India (RBI) announced that it was transferring ₹500 billion to the central government’s coffers, in addition to the ₹100 billion it paid in March. The interim dividend was meant to shore up the government’s finances amid rising oil prices, falling forex reserves and a worsening bad loan crisis.

In fact, as of November 2018, the government had already blown through 115% of its budgeted market borrowing for the fiscal year. The government had budgeted a fiscal deficit of ₹6.24 trillion for the whole year and had already spent ₹7.15 trillion by November, with five months to go.

This is the third straight year the government has failed to meet its fiscal deficit target. It has raised its target for the next year to 3.5% as a resul


SEE ALSO:

Indian government may not meet its fiscal deficit target because of lower tax collections: India Ratings

A big handout from the RBI could help the Indian government meet its fiscal deficit target
{{}}
Add Comment()
Comments ()
X
Sort By:
Be the first one to comment.
We have sent you a verification email. This comment will be published once verification is done.