India’s Chief Economic Adviser is “quite confident” that the central government will meet the fiscal deficit target set for the current year on better-than-expected revenues.
The government has budgeted for a fiscal deficit of 6.8% of GDP in FY22, although economists see a risk of slippage due to a recent resumption of food transfers. These transfers were estimated to cost the exchequer around Rs 93,000 crore.
Subramanian, however, believes the target can be met.
“We should be sticking to the 6.8% target that we have laid (down), because the revenue situation is looking much better,” Subramanian told BloombergQuint in an interview.
For the April-May 2021 period, the government’s fiscal deficit stood at Rs 1.23 lakh crore, or 8.2% of the budget estimate. Last year, the fiscal deficit for the two months was at 59.6% of the budget estimate. Higher tax and non-tax revenue helped improve government finances in the first two months of the year.
The government’s net tax revenue of Rs 2.33 lakh crore collected during the first two months of the fiscal was 15.1% of the budget estimate. Even in a pre-pandemic year like FY20 and FY19, net tax revenue collected in the April-June period was just about 6.8-6.9% of the budget goal.
While tax collections are likely to slow temporarily due to the second wave, Subramanian expects a pick-up thereafter.