India’s Fiscal Deficit In September At 92.6% Of 2019-20 Target

India’s fiscal deficit widened in September over the previous month.

The government is likely to run a fiscal deficit higher than the 3.3 percent of GDP target announced in Union Budget 2019-20 because of the recent cut in corporate tax rates. “Revenue foregone for the reduction in corporate tax rate is Rs 1.45 lakh crore per annum,” Finance Minister Nirmala Sitharaman had said.

That means the fiscal deficit will get pushed to Rs 8.48 lakh crore, assuming all components of government revenue and expenditure remain unchanged. According to Union Budget documents, the fiscal deficit in actual terms was pegged at Rs 7.04 lakh crore.

This fiscal deficit of Rs 8.48 lakh crore works out to 3.97 percent of India’s GDP, using the nominal GDP assumptions made in the Union Budget.

To be sure, the final fiscal deficit will be influenced by any higher-than-expected increase in tax collections, lower spending or a pick-up in asset sales.