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Several critics including some rating agencies have doubted prospects of meeting this ambitious fiscal deficit target.
Illustration: Uttam Ghosh/Rediff.com
Finance Minister Nirmala Sitharaman on Friday lowered the fiscal deficit target to 3.3 per cent for the current fiscal from the earlier estimate of 3.4 per cent of the GDP.
"The fiscal deficit this year is 3.3 per cent brought down from 3.4 per cent," she said while presenting Budget for 2019-20.
While presenting interim Budget 2019-20 in February, the government had pegged fiscal deficit target at 3.4 per cent.
Dismissing apprehension over meeting fiscal deficit target of 3.3 per cent of the GDP, the finance ministry said the lower target is realistic as the government is expecting net additional revenue of Rs 6,000 crore over the interim Budget estimates.
Several critics including some rating agencies have doubted prospects of meeting this ambitious fiscal deficit target.
Finance secretary Subhash Chandra Garg in a customary briefing post Budget said, "On the revenue side as compared to actual of 2018-19, direct taxes are expected to increase by 17.5 per cent, indirect taxes are going up by only 15 per cent.
“This is very realistic targets in our judgement. On non-tax side, there is also an increase as we are expecting better dividends."
On expenditure side, he said, it is more or less the interim Budget only with an increase of Rs 2,000 crore.
"All these put together gives us a saving of Rs 6,000 crore as compared to interim Budget that brings down fiscal deficit from 3.4 per cent to 3.3 per cent.
"Some concern raised that outside Budget there might be borrowing even there, there is the reduction.
“The fully serviced bonds, it has been brought down from Rs 64,000 crore to Rs 56,000-57,000 crore...so the number is reasonable," he said.
Fiscal deficit is the difference between expenditure and revenue.
Earlier in the day, Moody's said there are risks of India missing 3.3 per cent fiscal deficit target for the current financial year if tax revenue falls short of projection.
The rating agency, however, said the headline deficit may be achieved but through reliance on one-off revenue such as divestments and transfers from the central bank, and off-budget spending.
The government has pegged divestment target for the current financial year at Rs 1.05 lakh crore, up from Rs 90,000 crore projected in Interim Budget for 2019-20 in February.
Moody's said that in the Union Budget, the government announced a lower fiscal deficit target for fiscal 2020, while maintaining its support for growth and incomes.
"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.