Budget lowers fiscal deficit, experts raise doubt

Finance Minister Nirmala Sitharaman’s Budget on Friday lowered the fiscal deficit target to 3.3% for 2019-20 from 3.4% in the interim budget presented in February but experts and rating agencies raised doubts on her optimistic projections.

Fiscal deficit is the difference between government expenditure and its revenues.

“There’s a risk that India could miss its deficit target for fiscal 2019 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.
“We believe it will be a struggle as the revenue assumptions do look optimistic. Plus, the government has assumed higher nominal GDP growth. Given our view of lower growth, tax buoyancy is likely to disappoint and will require expenditure pruning to meet the budgeted fiscal deficit target. However, the positive overall signal should supersede these concerns for now,” Nomura Securities said.

In February too, the government had somehow managed to bring the deficit at 3.4% but only after pushing certain subsidies payouts in the next year’s budget. On the sale of public companies, 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.