The interim Budget 2019-20 shows that the fiscal deficit for the current fiscal will breach the budgeted estimate (BE) of 3.3% of GDP at Rs6.24 lakh crore by 0.1 percentage point.
A revised fiscal deficit of 3.4% of GDP at Rs 6.34 lakh crore was narrower than what was expected. In FY18, it had come at 3.5% of GDP at Rs 5.9 lakh crore against the budgeted 3.3% of GDP.
"Budget 2019-20 reflects the government's firm commitment to substantially boost investment in agriculture, social sector, education and health. This is substantiated by an increase in expenditure of Rs 3,26,965 crore over revised estimate (RE) (2018-19) while keeping the fiscal deficit at 3.4% of GDP," the government's budget document stated.
The government has revised the total expenditure by Rs15,022 crore to Rs24. 57 lakh crore compared to the budgeted estimate (BE) for the current fiscal. The fiscal deficit for FY20 has been revised 30 basis points to 3.4% of GDP.
Ranen Banerjee, leader at PwC India, said there were "risks" to attaining the revised fiscal deficit estimate. "One of the assumptions is the disinvestment target will still be met. We have to see how the disinvestment target (Rs 80,000 crore) is achieved, how fast the revenue collection happens in the next two months (before the election code kicks in March) and how their performance (on this front) will determine the final number," he said.
The government has raised Rs 35,000 crore of budgeted divestment till now.
D K Srivastava, chief policy advisor, EY India, said slippage in the fiscal deficit has been contained mostly because of assumptions of higher non-tax revenues; "a lower slippage is being shown due to the increase in non-tax revenue, where the actual dividend from the RBI to the tune of Rs 20,000 crore has been shown. It also depends on an increase in corporate tax revenues of Rs 60,000 crore," he said.
He attributed the bigger miss in FY20to the farm income support scheme that has been introduced in the Interim Budget this year. "The 3.4% is a larger slippage for FY20. If the burden on account of the farm income support programme actually increases in magnitude then that would become a cause of concern," he said.
The EY economist was also worried about the quality of fiscal deficit as "capital expenditure actually came down to 1.6% of GDP. Apart from other things, the quality of fiscal deficit is such that only 48% of the fiscal deficit is accounted for capital expenditure."
Devendra Kumar Pant, chief economist and senior director (public finance) at India Ratings and Research, said the revised fiscal deficit estimate "looked slightly stressed". "If your revenue deficit keeps on increasing and naturally your quality of fiscal deficit will not be good," he said.
The government revised the gross tax revenue estimate for the current fiscal to Rs 22.48 lakh crore from the BE of Rs 22.71 lakh crore.
INTERIM BUDGET 2019-20
62.70 pts – or 0.58%, rise in Nifty as the investor’s sentiment was boosted
7.48% – gain in HeroMotoCorp stock, making it best performer on Sensex on Friday
Rs 15.022 cr – is the revised total expenditure by govt for current fiscal
Rs 22.48L cr – is the revised estimate for the gross tax revenue
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