India’s Fiscal Deficit In April-June Reaches 83% Of Budget Target

India’s fiscal deficit reached Rs 6.62 lakh crore, or 83.2% of the budgeted estimate in the quarter ended June as the government’s revenue remained stressed amid the disruptions caused by the coronavirus pandemic.

The gap between the revenue and expenditure during the same period in 2019-20 stood at 61.4% of the budgeted target, according to data on the website of the Controller General of Accounts.

India’s fiscal deficit target estimated in the Union Budget 2020-21 was Rs 7.96 lakh crore, or 3.5% of the gross domestic product. But that’s expected to be revised as the government increased its borrowing target to tide over the Covid-19 crisis. Market borrowings for the fiscal ending March 2021 has been increased to Rs 12 lakh crore from Rs 7.8 lakh crore budgeted earlier.

The coronavirus pandemic struck India’s economy when it was already slowing. The world’s biggest lockdown stalled all business activities, barring essentials, and capped consumption, before the nation began to ease curbs from May-end. Still, that pushed the economy to what may be its first full-year contraction in more than four decades.

• India’s revenue receipts were 7.4% of the target set for the current financial year against 14.5% achieved in the same period last year. The government’s revenue was Rs 1.50 lakh crore in April-June 2020.
• Its total expenditure was Rs 8.16 lakh crore, which was 26.8% of the full-year target compared with 25.9% spent last year. The government’s capital expenditure was 21.4% of the budgeted target of Rs 4.12 lakh crore.
• Revenue expenditure was at 27.7% of the full-year target of Rs 26.30 lakh crore.
• Revenue deficit was at 94.8% of the budgeted target of Rs 4.12 lakh crore.

Tax Revenue

The government’s net tax revenue in the April-June period was Rs 2.69 lakh crore against Rs 4 lakh crore collected a year ago.

Of this, Rs 62,123 crore was collected as income tax against Rs 96,927 crore last year. About Rs 54,212 crore was collected as corporate tax, 23% lower than the amount collected last year.

• Direct tax collection was Rs 1.19 lakh crore, about Rs 51,460 crore lower than last year’s collection.
• Total indirect tax collected during the period was Rs 1.51 lakh crore.

The contraction in gross tax revenue has narrowed to 23% in June post a contraction of 41% in May, in line with some recovery in economic activity during the unlock phase, said Aditi Nayar, vice-president at ICRA Ltd.

But Nayar expects the government’s net tax revenue, non-tax revenue and disinvestment proceeds to together trail the budgeted target by more than Rs 6 lakh crore, highlighting the extent of the revenue shock being faced by it. Considering this along fiscal support announced under the 'Aatmanirbhar Bharat', and expenditure curbs, the fiscal deficit will surge to Rs 13 lakh crore in the ongoing financial year, Nayar said in a note.