DNA Money Edit: Can govt achieve the fiscal deficit target?

The stock market will breathe easy as the government is close to the revised fiscal deficit target -- the gap between the expenditure and revenue -- of 3.4% of the Gross Domestic Product (GDP) for 2018-19. But the government has a Herculean task of constricting expenditure to meet the target amid shortfall in revenues from Goods and Services Tax (GST) and direct tax. 

The revised fiscal deficit target for 2018-19 stands at 3.4% (Rs 6.34 lakh crore, in absolute terms) in the interim Budget, down from the earlier estimated 3.3%. The government may slash expenditure by around 2.5% (Rs 60,000 crore) of the budgeted amount of Rs 24.57 lakh crore for the current year, primarily on account of savings from various departments, cut in capital expenditure and rollovers.

Finance secretary Subhash Chandra Garg is confident that the shortfall in indirect tax collection would be compensated by lower government expenditure. What is worrying is the potential shortfall of about Rs 40,000 crore in GST collections and another Rs 50,000 crore in direct tax collections. On the disinvestment front, the government has so far garnered Rs 57,523 crore and is likely to reach closer to the target of Rs 80,000 crore.

If the government is successful in driving the expenditure cut, the slippage will see a corresponding fall.