Budget 2019: India Risks Missing 3.3% Fiscal Deficit Target If Tax Revenue Underperforms, Says Moody’s

Moody’s on Friday said that there are risks of India missing 3.3 percent fiscal deficit target for the current financial year if tax revenue falls short of projection.

Union Budget 2019 lowered fiscal deficit projection for the current financial year to 3.3 percent from 3.4 percent targeted in the February’s interim budget. The fiscal deficit—the gap between government expenditure and revenue—was 3.4 percent in 2018-19.

“There’s a risk that India could miss its deficit target for fiscal 2019-20 if income from tax revenue underperforms projections, as it did last year,” Moody’s Investors Service Associate Managing Director (Sovereign Risk Group) Gene Fang said.

The rating agency, however, said the headline deficit may be achieved but through reliance on one-off revenue such as disinvestments and transfers from the central bank, and off-budget spending.

The government has pegged disinvestment target for the current financial year at Rs 1.05 lakh crore, up from Rs 90,000 crore projected in interim Budget.

“Achieving these competing goals will be challenging. We expect the economy to grow relatively slowly, despite the government’s income support measures,” Fang said.

In addition to funding, an expansion of support for farmers, a new pension scheme and relief for small taxpayers, as previously announced, the latest budget includes a Rs 70,000-crore recapitalisation of state-owned banks.

“This will support growth by encouraging the flow of credit to the economy, although simultaneously adding to government debt,” Fang said.