Budget 2020: Will fiscal deficit breach budgeted target? Here’s what may happen

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Published: January 15, 2020 5:08:40 PM

Budget 2020-21: The tax collection may weigh on the fiscal balance amid muted direct, indirect and GST tax collection, the report by HDFC Bank said.

Union Budget 2020 India: Even the lower than budgeted nominal GDP may also exert pressure, it also said.

Budget 2020 India: The fiscal deficit may breach the budgeted target by 20-30 bps, coming in at 3.5 per cent to 3.6 per cent of GDP, a report said. The tax collection may weigh on the fiscal balance amid muted direct, indirect and GST tax collection, the report by HDFC Bank said. Even the lower than budgeted nominal GDP may also exert pressure, it also said. The government may go in for an expenditure cut and it’s expected from ministries (agri, roads, health, tourism, etc.) that have underspent so far in this financial year, it also said. The tax buoyancy may fall below the budgeted level in FY20, the report stated. “Even after removing the impact of the corporate tax cut, buoyancy is expected to remain low, signaling the lack of an improvement in tax collection efficiency and compliance,” report by HDFC Bank added.

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The budget may not see a marked departure from past budgets. “We expect the government to consolidate fiscal deficit to 3.4% of GDP in FY21 with a gross borrowing estimate of Rs 7.7 trn in FY21. There could be minor tweaks to the personal income tax slabs but the focus could be on higher allocation for DBT schemes,” it said. The recapitalisation amount could be lower in the upcoming fiscal as the financial health of banks is expected to improve, it added.

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Finance Minister Nirmala Sitharaman is slated to present the budget on February 1, 2020. The budget would be watched closely amid the ongoing slowdown on account of both global and domestic factors. The economy recorded a dismal 4.5 per cent in Q2FY20. The first advance estimates by the government have lowered the growth for the ongoing fiscal to 5 per cent, in line with the RBI and other global agencies.

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