3 Aces up Modi’s sleeve to bring fiscal deficit back under 3.4% target

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February 27, 2019 2:25 PM

The NDA government may be eyeing three sources of revenue which may help India cut fiscal deficit back to the targeted levels in the remaining two months of the current financial year.

Government has released the monthly account up to the month of January 2019, according to which the government has not only surpassed the full year fiscal deficit target but has exceeded it by 21.5 per cent during the ten months of this fiscal year 2018-19. Further, market borrowings continue to be the largest source for financing the fiscal deficit.

However, there is still likelihood of attaining back the revised fiscal deficit target of 3.4 per cent by the end of march. The NDA government may be eyeing three sources of revenue which may help India cut fiscal deficit back to the targeted levels in the remaining two months of the current financial year.

RBI interim dividend: The Rs 28,000 crore interim dividend by the RBI announced recently, which was not accounted for in the estimates till January, would help to shore up non-tax revenue. However, this could be at the expense of capital expenditure in the remaining months of the fiscal, said CARE Ratings report.

Improved tax collection: There are possibilities of higher tax collection by the end of last quarter. The revenue receipts have remained lower till now as compared to last year on the account of lower tax revenue collections. But with rising GST collection since January and increase in direct tax collection by the end of March, the revenue receipts are expected to rise.

Disinvestment proceeds: Disinvestments proceeds, which are already at 45 per cent of the budget target so far, are further expected to rise in February-March. The divestment process has recently gained up momentum with the Government of India raising Rs 10,000 crore from Bharat 22 ETF, Rs 5300 crore from sale of stake in Axis bank — both in February, and not accounted for till the January fiscal deficit figures. Government also proposes to sell REC Limited to PFC Limited. With these transactions, the government will likely garner Rs 65,000 crore from disinvestment in the full fiscal year, albeit, falling short of budgeted Rs 80,000 crore target for FY2019, ICRA Ltd Vice President Anil Gupta recently said to Financial Express Online.

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