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Fiscal Deficit May Increase by 6.8% of GDP: Report

CGA says that fiscal deficit has expanded to 83 per cent of Budget Estimate within the April-June quarter primarily thanks to lower collection and expenditure for Covid-19 relief.

SMEStreet Desk

04 Aug 2020 10:03 IST

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With economic disruptions set for an extended haul thanks to Covid-19 pandemic, India could see its fiscal deficit this year to balloon to over 6.8 per cent of Gross Domestic Product , brokerages analysing the primary quarter deficit numbers have said.

The Controller General of Accounts on Friday said that country’s fiscal deficit has expanded to 83 per cent of Budget Estimate within the April-June quarter primarily thanks to lower collection and better expenditure for Covid-19 relief. According to a report on Indian economy by Emkay Global Financial Services, low economic activity and lower tax collections including expanded expenditure in schemes like Gandhi Rural Employment Guarantee Act, PM-KISAN and extension of Pradhan Mantri Garib Kalyan Yojana till November, 2020 has created a scenario where the deficit would widen.

The current expansion (in deficit), the brokerage said, is primarily thanks to low economic activity within the last two months (e-way bill 7 per cent less than last year in June-end) and an extension of the tax filing deadline to Aug’20.

“Capital spending has surged 40% thanks to ways and means advances for FCI (high procurement) and road spending (base effect thanks to low spending in Q1FY19 thanks to elections); excluding these two, spending has declined by 4%,” Emkay has said in its report.

The fiscal deficit is that the total amount by which the government’s expenses for a year exceeds its revenues.

The concern on the deficit comes from the trend witnessed within the half-moon of current fiscal. Lower net revenue receipts and elevated expenditure has pushed the fiscal deficit to 83 per cent of budget estimate within the three month period of April-May.

GDP CAg