Rating agency estimates, fiscal deficit up to 7% of GDP in the current financial year, low earnings and high spending will increase trouble
The fiscal deficit of the central government in fiscal year 2020-21 can be up to 7% of GDP. It was estimated to be 3.5 percent in the budget. Rating agency Brickwork Ratings has made this estimate. The rating agency said that the central government’s revenue collection fell sharply in the first three months of the current financial year for the impact of the lockdown on economic activity.
First quarter lower collection than last year
According to data released by the Controller General of Accounts (CGA), the central government’s revenue collection in the first quarter of the fiscal year has been much lower than the same period a year earlier. According to the data, income tax revenue (personal income tax and corporate income tax) was down by 30.5 percent and GST (CGST + IGST + UTGST) by 34 percent in the first quarter.
- Income tax revenue fell 30.5% in the first quarter and GST collection fell 34%
- Spending increased 13.1% for incentive package under Self-reliant Indian Mission
Vast increase in spending for stimulus package
The central government’s expenditure has increased by 13.1 percent in the first quarter of the current financial year. There has been an increase in spending for the promotion of incentive packages under the Self-Reliant Indian Mission to save people and livelihood from COVID19. The result is that the total fiscal deficit in the first quarter has reached 83 percent of the budget estimate.
Estimates of economy in the third quarter
The rating agency estimates that the economy may pick up in the third quarter of the current financial year. The agency says that with early signs of a resumption of business activity, we can expect revenue collection to reach pre-covid levels by the end of the third quarter. The agency expects consumption to increase during the festive season.
If this situation persists for a long time, there will be a shortage of funds
The agency says the government may face a shortage of funds if the current situation persists for a long time. The government may miss the budget announcements for lack of funds. Despite the Rs 12 lakh crore loan announced by the government, there will be a shortage of funds. This may require the government to drastically cut schemes like capital expenditure and cherished MNREGA-National Health Mission.