FinMin’s Monthly Report Indicates Fiscal Deficit may Widen in FY2019-20

Receipts to meet 42 per cent of expenditure have to be raised in March

The Centre may not be able to keep the fiscal deficit to the revised estimate (RE) level of 3.8 per cent during fiscal year 2019-20, which ended on March 31, a Finance Ministry document has indicated.

Fiscal deficit is the difference between income and expenditure of the government.

According to the Monthly Summary Report of March, prepared by the Expenditure Department, the fiscal deficit reached 5.07 per cent at the end of February. “The receipts (for 11 months period of April 2019 to February 2020) are sufficient to cover only 58 per cent of expenditure,” it said. This means receipts to meet 42 per cent of expenditure (some of which were committed), have to be raised in a single month — March.

Data shows total receipts during 11 months were over ₹14.29-lakh crore, that is, 74 per cent of the RE. Gross tax collection was over ₹16.78-lakh crore (78 per cent of RE). The net tax revenue to the Centre was ₹11.14 lakh crore (74 per cent of RE) after deducting devolution to States and collections under National Calamity Contingent Duty (NCCD) to be transferred to National Disaster Response Force (NDRF). Total receipts also include non-tax revenue (₹2.63-lakh crore) and other receipts (₹51,092 crore). During this period, the government spent ₹24.65-lakh crore, which is 91 per cent of RE. Accordingly, fiscal deficit reached ₹10.36 lakh crore, 135 per cent of RE.

It may be noted that during the first 11 months of 2018-19, receipts were sufficient to cover only 61 per cent of expenditure and the fiscal deficit touched 4.52 per cent. However, with the help of cut and roll over of some expenditure, the Government managed to end FY 2018-19 with a fiscal deficit of 3.39 per cent.

Fiscal situation takes a hit

Now, the final fiscal deficit figure for 2019-20 has to be released in May. However, the developing fiscal situation due to the Covid-19 pandemic and the toll it is taking on the economy are bound to affect GST collection for March, the impact of which will be known on May 1 when the number is released. It may be noted that GST collection during a month needs to be deposited the next month with the government and the final data is released on the first day of subsequent month.

In the meantime, the Finance Ministry was expecting additional revenue through dispute resolution schemes — Vivad se Viswas (for Direct Tax) and Sabka Viswas (for legacy disputes related to Central Centarl Excise and Service Tax). Earlier, payment without any interest or penalty was possible till March 31, but now this can be done till June 30. So, there will be no additional revenue. At the same time, the Government has to make some advance expenditure for fighting Covid-19. All this will make it difficult to keep the fiscal deficit to the RE level of 3.8 per cent.