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Apr-Feb fiscal deficit balloons to 120% of revised target; will March collections reverse the story?

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Published: March 28, 2018 7:41:28 PM

India's fiscal deficit has soared to Rs 7.15 lakh crore at the end of February, which is 120% of the even revised full-year target of the fiscal year 2018-19. But wait, this number may not necessarily reflect upon what could be the situation at the end of the fiscal year.

Fiscal deficit at end of February breached. Will the story change in MarchApr-Feb fiscal deficit balloons to 120% of revised target; will March collections reverse the story?(Image: Reuters)

India’s fiscal deficit has soared to Rs 7.15 lakh crore at the end of February, which is 120% of the even revised full-year target of the fiscal year 2018-19. But wait, this number may not necessarily reflect upon what could be the situation at the end of the fiscal year. The March fiscal data is yet to come, and it may change the story — by how much that’s a ‘wait and watch’ situation.

“If you look at the trend, the collection through direct and indirect taxes in the month March is 20%, 30%, even 40% higher than the average collection of all the months between April and February. So, it is likely the fiscal situation will improve once the March data is here, by how much, we will have to wait and watch,” M S Mani, Partner, Deloitte India told FE Online.

The higher fiscal deficit by the end of February could also be because of the lower-than-expected GST collections, he added. Finance Minister Arun Jaitley in the Budget 2018 revised the FY18’s fiscal deficit target from 3.2 to 3.5%, saying that government’s revenue was hit on account of the GST implementation and deferment of spectrum auction.

The revised fiscal deficit, in absolute terms, is Rs 5.94 lakh crore as against Rs 5.47 lakh crore earlier. The data showed that the government has collected Rs 12.83 lakh crore revenue, which is 79.09% of revised estimates. Of this, over Rs 10.35 lakh crore is collected from taxes, while over Rs 1.42 lakh crore and Rs 1.05 lakh crore accrued on account of non-tax revenue and non-debt capital receipts.

The government is targeting a 3.5% fiscal deficit even as it was a good year for strategic disinvestment. The government raised the disinvestment target to Rs 1 lakh crore, up from Rs 72,500 crore in the Budget estimates. The centre is also facing revenue crunch as a part of GST collections is transferred to state governments to pare theirs loses. In 11 months until February, over Rs 5.29 lakh crore has been transferred to state governments as devolution of the share of taxes by the Centre.

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