The fiscal situation of the Narendra Modi government has worsened with the fiscal deficit in the first eight months of the financial year 2018-19 hitting 115% of the budget estimates. Experts have warned of fiscal slippage on account of shortfall in indirect tax collection.
The fiscal deficit for the period of April-November was Rs 6.24 lakh crore, at 114.8% of the Budget estimates. The government has set the fiscal deficit target at 3.3% of the Gross Domestic Product (GDP). Net tax receipts were Rs 7.32 lakh crore, the government data showed.
The government, however, has expressed confidence that it will meet the budgeted fiscal deficit target. However, the government is also staring at Rs 70,000 shortfall in indirect tax collection due to lower-than-expected GST collection and the excise duty cut on fuel announced in October.
Moreover, the proceeds from disinvestment have also been disappointing. In the first eight months, the government has been able to do disinvestment of PSUs worth only Rs 15,810 crore, just 18% of the full-year target of Rs 80,000 crore.
“There are several risks to meeting the budgeted targets for revenues and expenditures, with one of the predominant concerns arising from a possible shortfall in indirect tax collections, despite the seasonal pickup in tax revenues in the last quarter of every fiscal,” Aditi Nayar, Principal Economist, ICRA said.
However, the announcement of OMO purchases by the RBI in the month of January and the decline in crude oil prices would keep a check on G-sec yields in the immediate term, she added.