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New Delhi, The Centre's <keyword id="6365485" type="General" weightage="20" keywordseo="fiscal-deficit" source="Orion">fiscal deficit</keyword> in the first five months of 2023-24 touched 36 per cent of the full-year target, government data showed on Friday. In absolute terms, the fiscal deficit -- the gap between expenditure and revenue -- was Rs 6.42 lakh crore as of August-end, according to the data released by the Controller General of Accounts (CGA). The deficit stood at 32.6 per cent of the <keyword id="578082" type="General" weightage="20" keywordseo="budget-estimates" source="Orion">Budget Estimates</keyword> (BE) in the corresponding period of the financial year 2022-23. In the Union Budget, the government projected to bring down the fiscal deficit to 5.9 per cent of the gross domestic product (GDP) in the current 2023-24 financial year. The fiscal deficit was 6.4 per cent of the GDP in 2022-23 against the earlier estimate of 6.71 per cent. Unveiling the revenue-expenditure data of the central government for the April-August period of 2023-24, CGA said the net tax revenue was Rs 8.03 lakh crore, or 34.5 per cent, of the BE for the current fiscal. The net tax revenue collection was 36.2 per cent at August-end 2022. The central government's total expenditure in the first five months stood at Rs 16.71 lakh crore, or 37.1 per cent, of the BE. The expenditure was 35.2 per cent of the BE a year ago. Of the total expenditure, Rs 12.97 lakh crore was on the revenue account and Rs 3.73 lakh crore towards the capital account. Fiscal deficit is the difference between the total expenditure and revenue of the government. It is an indication of the total borrowings that are needed by the government.

Centre's fiscal deficit at Aug-end touches 36% of full-year target: CGA

New Delhi, Nov 19 () The government on Tuesday categorically stated that it does not intend to revise its fiscal deficit target of 3.3 per cent of gross domestic product (GDP) for the current financial year notwithstanding slowdown in economic activities.
 "No sir," Minister of State for Finance Anurag Thakur said in a written reply in the Rajya Sabha to a query if the government intends to revise fiscal deficit in view of the economic slowdown
 The minister further said expenditure of various ministries and departments of the government is as per the estimates approved by Parliament.
 In the first half of the financial year, 53.4 per cent of Budget Estimates was spent by various ministries and departments.
 Thakur also listed out the steps taken by the government to boost economic activities.
 The real GDP growth slowed to an over six-year low of 5 per cent in the first quarter of the current financial year.
 Replying to another question, Singh said non-performing assets of banks, after reaching a peak of Rs 10,36,187 crore as on March 31, 2018, have declined Rs 97,996 crore to Rs 9,38,191 crore as on June 30, 2019.
 Banks have also "effected record recovery" of Rs 4,27,115 crore over the last four financial years and the first quarter of the current financial year, including recovery of Rs 1,56,702 crore during the financial year 2018-19. NKD CS HRS

No intention to revise fiscal deficit target: Govt

New Delhi, The <keyword id="6357801" type="COMPANY" weightage="20" keywordseo="union">Union</keyword> <keyword id="26362" type="ORGANIZATION" weightage="20" keywordseo="Government">government</keyword>'s fiscal deficit soared to ₹10.75 lakh crore, or 135.1% of the 2020-21 Budget Estimates (BE), at the end of November 2020, mainly on account of low realisation of revenue due to disruption in business activities amid the coronavirus pandemic. The fiscal deficit at the end of November 2019 had stood at 114.8% of 2019-20 BE. In absolute terms, the fiscal deficit stood at ₹10,75,507 crore at the end of November 2020, according to the latest data released by the <keyword id="513373" type="COMPANY" weightage="20" keywordseo="Controller-General-of-Accounts">Controller General of Accounts</keyword> (CGA). The lockdown imposed to curb the spread of coronavirus had significantly impacted business activities and, in turn, contributed to sluggish revenue realisation. The fiscal defict, or gap between the expenditure and revenue, had breached the annual target in July this year. The government's total receipts stood at ₹8,30,851 crore (37% of BE 2020-21) till the end of November 2020. This included ₹6,88,430 crore tax revenue (net to centre), ₹1,24,280 crore of non-tax revenue and Rs 18,141 crore of non-debt capital receipts. Non-debt capital receipts consist of recovery of loans and disinvestment proceeds. The tax revenue collection was 42.1% of BE of 2020-21, compared with 45.5% of BE (2019-20) during the corresponding period a year ago. Non-tax revenue was 32.3% of BE. During the corresponding period of the last fiscal, it was 74.3% of BE 2019-20. During the corresponding period last fiscal, the total receipts were 48.6% of 2019-20 BE. According to the data, over ₹3.34 lakh crore were transferred to state governments as devolution of share of taxes by the <keyword id="6377129" type="COMPANY" weightage="20" keywordseo="government-of-india">Government of India</keyword> up to November 2020. The CGA data said the total expenditure incurred by the government stood at ₹19,06,358 crore or 63% of BE. Of the total expenditure, ₹16,65,200 crore was on revenue account and ₹2,41,158 crore on capital account. It further said that out of the total revenue expenditure, over ₹3.83 lakh crore was on account of interest payments and ₹2,02,119 crore towards major subsidies. For this financial year, the government had pegged the fiscal deficit at ₹7.96 lakh crore or 3.5% of the GDP in the <keyword id="6360189" type="COMPANY" weightage="20" keywordseo="union-budget">Union Budget</keyword>, which was presented by <keyword id="25455" type="COMPANY" weightage="20" keywordseo="finance">Finance</keyword> Minister <keyword id="129243" type="PERSON" weightage="20" keywordseo="Nirmala-Sitharaman">Nirmala Sitharaman</keyword> in February 2020. These figures, however, may have to be revised significantly in view of the economic disruptions created by the coronavirus pandemic. Fiscal deficit had soared to seven-year high of 4.6% of the gross domestic product in 2019-20, mainly due to poor revenue realisation. SEE ALSO: <a href="https://www.businessinsider.in/stock-market/news/top-stocks-to-watch-tata-steel-vedanta-adani-green-tata-motors-maruti-mm-dhfl-v-mart-indian-bank-and-others/articleshow/80038635.cms">Top stocks to watch — Tata Steel, Vedanta, Adani Green, Tata Motors, Maruti, M&amp;M, DHFL, V-Mart, Indian Bank, and others</a> <a href="https://www.businessinsider.in/tech/mobile/news/checkout-the-list-of-upcoming-new-mobiles-in-january-2021-with-expected-price/articleshow/80039794.cms">Upcoming smartphones in India in January 2021</a> <a href="https://www.businessinsider.in/international/news/ten-of-the-most-outrageous-predictions-for-2021-according-to-saxo-bank/slidelist/80040045.cms">From Amazon buying Cyprus to Germany bailing out France — here are ten of the most ‘outrageous’ predictions for 2021</a>

India's fiscal deficit is more than double its FY21 target

Indian markets looked very tentative on the first trading day after budget 2019 was announced. The recovery in the last hour of trade helped the Sensex and the Nifty close with gains, but the momentum came largely from the rebound in Reliance Industries in late trade. The gains in India's stock markets are underwhelming given the fact that global risk appetite has improved and Asian peers are near a four-month high. Companies that would benefit from higher demand, thanks to the many sops announced in the budget for the rural areas and the middle class, did not attract buyers. Stocks in the fast moving consumer goods (FMCG), healthcare and auto stocks witnessed heavy selling pressure. "While the government's growth assumptions appear reasonable, we think the government will continue to face challenges in meeting its fiscal targets, primarily due to structural increases in spending and difficulties in raising revenue further," Gene Fang, from global ratings agency Moody's, reportedly said. There are others who also fear that the finance ministry may be underestimating the deficit- the excess of expenditure over the earnings. "Market is fearing a fiscal slippage because of various announcements in the Interim Budget, like the higher borrowing programs by the government," Rusmik Oza, Head-Fundamental Research, Kotak Securities, told IANS. If indeed the fiscal deficit is more than what the government has projected, it would weaken the rupee, make imports costlier and push up inflation. 
 
 
 
 
 
 
 
 
 
 
 
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 There could be many reasons for why the deficit may exceed the target. "the government's estimate of GST collection in FY19 is on the higher side. The nominal GDP growth rate of 11.5% is also difficult to achieve," Oza said. The capital expenditure for the next year is 6%, which is very low according to Oza. Spending less on capital expenditure means the government is investing less on assets that will generate income in the future. India already spends a lot more on running the government than on assets that can produce growth. 
 
 
 
 
 
 
 
 
 
 
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 The market will continue to evaluate the budget proposals for a few more days. "Fears of slippage is because of governments fiscal deficit target of 3% in FY21. The 3.4% target for next year is also not good. It is not possible to reduce 0.4 per cent in a year," Deepak Jasani of HDFC Securities told the IANS. --With inputs from IANS

Markets just can't believe India's latest budget math

New Delhi, Dec 20 () IMF Chief Economist Gita Gopinath on Friday said India needs to keep its fiscal deficit target, which would require expenditure rationalisation and increased revenue mobilisation.
 Speaking at the 92nd Annual Convention of Ficci, she said that in the past few quarters, there has been a steep slowdown in private sector demand and there is now weakness in investment.
 And, if there is a prolonged weakness in investment, it will affect potential growth, she stressed at the special plenary moderated by Harsh Pati Singhania, former president of Ficci.
 "For India, macro stability is very important, which means stability on the fiscal front. A clear sense of keeping to the target of fiscal consolidation is very important. That would require increasing revenue mobilisation and also rationalising expenditure," Gopinath said.
 With tax revenue slowing in a sputtering economy, some states had on Wednesday suggested Finance Minister Nirmala Sitharaman to go for fiscal expansion and relax the deficit target to 4 per cent of the gross domestic product (GDP).
 The finance minister in full Budget 2019 reduced the fiscal deficit target to 3.3 per cent, from earlier 3.4 per cent for 2019-20. Keeping in mind its fiscal deficit target, the government has stayed with the borrowing plan for the financial year as announced in the Budget despite a sharp cut in corporate tax rate that is expected to cost Rs 1.45 lakh crore.
 Gopinath further said that "when we talk about fiscal consolidation, we think of it as a medium-term target which is something that has to be addressed over a period of time and not necessarily overnight".
 India's consolidated deficit (the Centre and states combined) is the highest among the G20 nations, she added.
 "So, it's not a free lunch and this has be very carefully managed," she said.
 The IMF's chief economist also said it is also important for India to undertake reforms.
 But, to be able to do this, some clarity, greater clarity and greater certainty would help, she said adding that "this is also applied to big reforms like the GST (goods and services tax)".
 On increasing share of the manufacturing sector, Gopinath said another set of big reforms are required to get manufacturing on the ground and for India to have bigger presence on the export front.
 There are important reforms needed with respect to land acquisition and labour laws.
 "Now, we would like to think that with the government having strong political mandate, this would be right time to undertake those kind of reforms. In the absence of it, India is missing out on what we assume globally in terms of shifting global supplies," she added.
 India's economic growth slowed to an over six-year-low of 4.5 per cent in the second quarter of the current financial year.
 Fitch Ratings on Friday cut India's GDP growth forecast for 2019-20 to 4.6 per cent on deterioration in business and consumer confidence. BKS NKD HRS

India needs to keep fiscal deficit target; requires increased revenue mobilisation: Gopinath

As expected, the government will breach its <keyword id="6365485" type="DEFINITION" weightage="20" keywordseo="Fiscal-Deficit">fiscal deficit</keyword> target of <keyword id="2464406" type="PERSON" weightage="20" keywordseo="3-3">3.3%</keyword> of <keyword id="35050" type="CITY" weightage="20" keywordseo="gdp">GDP</keyword> for 2018-19. Upon unveiling the government’s interim <keyword id="6358021" type="ORGANIZATION" weightage="20" keywordseo="budget">budget</keyword> in the Parliament today, the acting Finance Minister <keyword id="6355222" type="PERSON" weightage="20" keywordseo="piyush-goyal">Piyush Goyal</keyword> said that the deficit was expected to be 3.4% of GDP. This was largely due to the shortfall in tax revenues, higher spending obligations and a sluggish disinvestment programme. That was further exacerbated by farm loan waivers and generous spending on welfare schemes to secure votes. This comes despite help from the Reserve Bank of India in the form of an interim dividend. In August 2018, the Reserve Bank of India (RBI) announced that it was transferring <a href="https://www.businessinsider.in/a-big-handout-from-the-rbi-could-help-the-indian-government-meet-its-fiscal-deficit-target/articleshow/65336769.cms">₹500 billion</a> to the central government’s coffers, in addition to the ₹100 billion it paid in March. The interim dividend was meant to shore up the government’s finances amid rising oil prices, falling forex reserves and a worsening bad loan crisis. In fact, as of November 2018, the government had already blown through <a href="https://economictimes.indiatimes.com/news/economy/indicators/april-november-fiscal-deficit-touches-nearly-115-per-cent-of-fy-target/articleshow/67272193.cms">115% </a>of its budgeted market borrowing for the fiscal year. The government had budgeted a fiscal deficit of ₹6.24 trillion for the whole year and had already spent ₹7.15 trillion by November, with five months to go. This is the third straight year the government has failed to meet its fiscal deficit target. It has raised its target for the next year to 3.5% as a resul SEE ALSO: <a href="https://www.businessinsider.in/indian-government-may-not-meet-its-fiscal-deficit-target-because-of-lower-tax-collections-india-ratings/articleshow/66824092.cms">Indian government may not meet its fiscal deficit target because of lower tax collections: India Ratings</a> <a href="https://www.businessinsider.in/a-big-handout-from-the-rbi-could-help-the-indian-government-meet-its-fiscal-deficit-target/articleshow/65336769.cms">A big handout from the RBI could help the Indian government meet its fiscal deficit target</a>

The Indian government expects to overshoot its fiscal deficit target by 0.1% of GDP

<ul><li>For the third straight year, the Indian government’s fiscal deficit is likely to be 3.5% of GDP instead of 3.3%, ratings agency India Ratings &amp; Research has predicted. </li><li>As per the calculations by the research firm, the fiscal deficit may breach the budgeted target of ₹6.24 trillion </li><li>According to India Ratings, the country’s GST tax collection for the first half of <keyword id="4873520" type="PERSON" weightage="20" keywordseo="fy19">FY19</keyword> stood at 4.3% against its budgeted growth of 22.2% for FY19. </li></ul>The Indian government may not be able to meet its fiscal deficit target for FY19 in part due to the shortfall in tax revenues and lower disinvestment revenue, rating agency, India Ratings &amp; Research, has <a href="https://www.indiaratings.co.in/PressRelease?pressReleaseID=34920&amp;reportName=For-Third-Consecutive-Year%2C-Fiscal-Deficit-Likely-to-be-3.5%25-of-GDP">warned.</a> As per the calculations by India Ratings, India’ fiscal deficit is likely to be ₹399 billion more than what was targeted by India’s <keyword id="47209" type="ORGANIZATION" weightage="20" keywordseo="Finance-Ministry">Finance Ministry</keyword> earlier this year, India Ratings said in a recent report. The government had set a fiscal deficit target of ₹6.24 trillion or 3.3% of GDP. But given the current financial trends, the deficit is likely to be ₹6.67 trillion or 3.5% of GDP, said the report. This will be the third consecutive year when India’s fiscal deficit will be 3.5% of GDP, noted the report. The agency anticipates a tax revenue shortfall of ₹224 billion primarily because of the shortfall in proceeds from direct and indirect tax collection. Despite the government’s efforts to prevent revenue leakage in GST, tax collection only rose 4.3% during the first half of FY19, much lower than the budgeted growth of 22.2% for FY19. Additionally, the government is also likely to miss its disinvestment target due to lower receipts. As of October, total disinvestment receipts were nearly ₹152 billion against the budgeted receipt amount of ₹800 billion. Even though the central government may expect a pick up in disinvestment in December but it will not be enough to make up for the shortfall, said India Ratings. Revenue Expenditure growth, which was also slightly lower than the target in the first half of FY19 is now expected to boost mainly because of a surge in the minimum support prices of kharif crops and the implementation of the government’s Ayushman Bharat program for bringing affordable insurance for Indian masses. SEE ALSO: <a href="https://www.businessinsider.in/indias-securities-regulator-wants-to-develop-indias-corporate-bond-market-so-it-has-ordered-large-companies-to-raise-at-least-25-of-their-long-term-debt-from-bond-sales/articleshow/66823456.cms">India’s securities regulator wants to develop India’s corporate bond market — so it has ordered large companies to raise at least 25% of their long-term debt from bond sales</a> <a href="https://www.businessinsider.in/after-weeks-of-tension-the-reserve-bank-of-india-gives-in-to-some-of-the-central-governments-demands-while-retaining-its-independence/articleshow/66705908.cms">After weeks of tension, the Reserve Bank of India gives in to some of the central government's demands while retaining its independence</a> <a href="https://www.businessinsider.in/modi-administration-pushing-full-budget-ahead-of-general-elections-2019/articleshow/66750097.cms">Modi administration is so confident about its re-election chances that it’s reportedly releasing a full budget for the next financial year</a>

Indian government may not meet its fiscal deficit target because of lower tax collections: India Ratings

<ul><li>Rupee is expected to stay weak as <keyword id="6359072" type="UNKNOWN" weightage="20" keywordseo="oil">oil</keyword> prices rise. </li><li>Markets fear the Indian government will breach <keyword id="6365485" type="DEFINITION" weightage="20" keywordseo="Fiscal-Deficit">fiscal deficit</keyword> target. </li><li>Higher fiscal deficit hurts government’s ability to spend for economic growth and increases borrowing cost. </li></ul> The rupee closed at 70.49 at the end of last week, capping a 4% decline since the start of the year.This is largely due to the fact that oil prices ticked up and markets have priced in a series of handouts to farmers by the government as an election ploy. Last year proved to be a mixed bag for the Indian currency. After declining by 14% in the year to October, the rupee rebounded strongly in the last few months of 2018 owing to the decline in oil prices, and closed at 69.71. The value of the rupee has significant implications on India’s fiscal deficit and vice versa. When the rupee declines, the fiscal deficit, which measures the difference between government expenditure and revenue, widens because oil becomes more expensive to import. On the other hand, if India’s fiscal deficit widens, it causes foreign investors to lose confidence in the economy and hence they pull money out of the country, which further weakens the currency. With oil prices expected to grow sluggishly in the initial period of year, the rupee is expected to stay weak. However, the unveiling of the Union <keyword id="6358021" type="ORGANIZATION" weightage="20" keywordseo="budget">Budget</keyword> on 1 February by Finance Minister Arun <keyword id="6390789" type="PERSON" weightage="20" keywordseo="jaitley">Jaitley</keyword> could provide markets and currency speculators with some much-needed clarity as to where the rupee will go in 2019. The Budget, which will be an interim budget since it is an election year, will likely include a conclusive statement on whether the central government will breach or meet its fiscal deficit target for the year - which is 3.3% of <keyword id="35050" type="CITY" weightage="20" keywordseo="gdp">GDP</keyword>. The target has looked increasingly unrealistic in recent months, due in part to lower indirect tax collections, a slow disinvestment process and concessions to farmers. While the government has tried to curtail its capital expenditure, this might not be enough. “It will be quite difficult for the government to achieve its target as the fiscal deficit is currently in the region of 3.9% of GDP” says Gaurav Sharma, a senior manager at Religare Securities. Sharma explained that if this came to pass, it “would seriously hurt the rupee”. However, if the government breaches its deficit target, it will exacerbate investor worries, as a high deficit threatens India’s ability to spend for economic growth and increase it’s borrowing cost. There is room for surprise, though. Even if the fiscal deficit is wider, but less than experts’ predictions, it could provide support for the currency. On the other hand, with elections due in May 2019, the government expected to play into the desires of key voter blocs, and as such, could include further promises of loan waivers and additional financial largesse. The central government, for its part, has said that it will meet its fiscal deficit target. Towards the end of December, Jaitley said <a href="https://economictimes.indiatimes.com/news/economy/policy/government-to-meet-fiscal-deficit-target-of-3-3-arun-jaitley/articleshow/67207903.cms">that the 3.3% mark was in sight,</a> and subsequently clarified that the government <a href="https://indianexpress.com/article/india/not-seeking-rbi-surplus-to-finance-fiscal-deficit-arun-jaitley-5517571/">would not require a surplus </a>from the central bank’s coffers to meet its goal. As things stands, until the interim budget is unveiled, it seems that all bets are off. SEE ALSO: <a href="https://www.businessinsider.in/the-indian-rupee-just-clocked-its-highest-one-day-gain-since-2013-as-global-oil-prices-plummeted-to-a-yearly-low/articleshow/67158268.cms">The Indian rupee just clocked its highest one-day gain since 2013 as global oil prices plummeted to a yearly low</a> <a href="https://www.businessinsider.in/oil-prices-are-falling-and-thats-great-news-for-the-indian-rupee/articleshow/66768210.cms">Oil prices are falling and that’s great news for the Indian Rupee</a> <a href="https://www.businessinsider.in/indian-government-may-not-meet-its-fiscal-deficit-target-because-of-lower-tax-collections-india-ratings/articleshow/66824092.cms">Indian government may not meet its fiscal deficit target because of lower tax collections: India Ratings</a>

Here’s why the rupee will remain weak at least until Arun Jaitley’s budget speech

One may argue, that when on 29 February 2016 the Finance Minister (FM) <keyword id="42575" type="PERSON" weightage="20" keywordseo="Arun-Jaitley">Arun Jaitley</keyword> will be presenting the General <keyword id="2783177" type="UNKNOWN" weightage="20" keywordseo="Budget-2016">Budget 2016</keyword> for the financial year 201-17, his job will be more difficult than what Manmohan Singh faced when he presented the ‘make-or-break’ budget in July 1991. For one, in 1991 there was an acknowledged economic crisis. Thus, there was a broader consensus on the likely course of action required to get India out of crisis. The doubt was whether India will bite the bullet or not. Well India did bite and Manmohan Singh was able to usher in liberalisation in India. 
 
In comparison, Mr. Jaitley has to deal with at least two sets of dilemma. Firstly, there is no consensus currently about the state of Indian economy. Secondly, there is uncertainty of whether sticking to the target of fiscal consolidation (3.9% Fiscal Deficit in FY16; 3.5 in FY17; 3.0 in FY18) as the FM targeted in the previous budget is the best course of action or not. 
 
Dilemma on the State of Economy: 
 
The expected FY16 real GDP growth of 7.6% (FY15:7.2%; FY14:6.6%) is among the best in the world, among the large global economies. Clearly the number does not look worrisome. But focus on aspects other than this number and one would come across the weakest corporate performance in a decade, a burgeoning bad debt problem in the banking system. And nominal GDP growth in FY16(estimated at 8.6%) is at least a decade low and showing a sequential decline over the previous three years(FY15: 10.8% ; FY14:13.3% ; FY13:13.9%). 
 
Incidentally, nominal GDP or the GDP calculated at current prices is the one which the participants in an economy experiences. The real GDP is the nominal GDP adjusted for, by a measure of systemic inflation known as GDP deflator. In the first three quarters of FY16 the GDP deflator has been either below 2% of has been below 0. If such GDP deflator values continue over the next few quarters’ Indian economy may be closing in on a deflationary scenario. Clearly, the real GDP growth may not be giving a cogent reading of the economy. Else what will explain the current clamour of industry bodies for growth measures (read government spending) from the government, in the current budget? 
 
No Small Nominal Headache: 
 
Why the FM will be particularly worried about the falling nominal GDP growth is because the fiscal deficit target is measured as a proportion of nominal GDP. When Mr. Jaitley presented the 2015-16 budget on 28th February 2015, he projected a fiscal deficit of INR 5.55 trillion (1 trillion is 1 Lakh crore). This was expected to be 3.9% of the then(as of Feb,2015) expected FY16 nominal GDP of INR 141 trillion. This is because the budget expected an 11.5% nominal GDP growth in 2015-16 over the then projected 2014-15 nominal GDP of INR126.5 trillion. 
 
Subsequently, the FY15 nominal GDP was re-estimated at a marginally lower INR 124.9 trillion and the FY16 nominal GDP growth is expected to be a decade low 8.6%. Even if the FY16 fiscal deficit remains at INR 5.55 trillion still under the recent nominal GDP estimates the fiscal deficit will be 4.1%, which may be construed as a slippage. 
 
Avoiding Fiscal Deficit slippage a Challenge 
 
Even in the current year (2015-16 ) if the government is to meet the 3.9% fiscal deficit target then the fiscal deficit has to be brought down by INR 200 billion to INR 5.34 trillion. That looks a bit far-fetched. 
 
How may 2016-17 fiscal deficit look like? Lets’ assume that the crude oil prices remain at current level and government continues to earn significant indirect tax by charging excise on petroleum products. The government may end up with incrementally spending approximately INR 1.2 trillion in lieu of higher salary of government employees as per 7th pay commission and to a lesser extent on One-Rank-One-Pension(OROP) scheme for soldiers. Since revenues are unlikely to go up commensurately one may realistically be looking at a fiscal deficit to the tune of INR 6-6.5 trillion. If FY17’s fiscal deficit target (3.5%) is to be met then the nominal GDP for FY17 needs to be to the tune of 20%, clearly that is not happening. 
 
Even if FY16’s target of 3.9% of fiscal deficit continues in FY17 then also a nominal GDP growth rate in excess of 10% needs to be assumed for the year FY17. Of course, this would mean an improvement in nominal GDP growth over FY16.While this is more plausible, the FM may face widespread criticism for slipping on the path of fiscal consolidation. This may adversely impact foreign investors particularly those invested in Indian fixed income securities. 
 
Damned if he Does, damned if he doesn’t: 
 
As such the FY16’s budget did not have too much spending in the nature of ‘government-growth-push’. This is reflected in the falling investment spend in the economy. As such major investments may not be expected from an over leveraged corporate sector, struggling with low capacity utilisation issues. If the FM decides to go for growth push spending along with the spending increases attributable to 7th pay commission and OROP the fiscal deficit will shoot up well over 4%. One is not sure, as to what extent it will scare global investors who may sell off on Indian securities, which may then weaken the Indian rupee. But clearly under such a scenario the government spending may not translate to a sharp improvement in growth. 
 
On the contrary, if the FM sticks of a fiscal deficit target of any number below 4%( but possibly higher than 3.5%) then government’s investment budget is likely to suffer. Such a move, while it will send a message of how determined the government is with respect to fiscal consolidation, may take a toll on growth. 
 
Clearly FY17’s budget would have challenged the best finance ministers India ever had. 
 
Deep Mukherjee was formerly senior director, Corporate Credit Rating at India Rating and Research, a Fitch Group company. He is currently a visiting faculty at IIM Calcutta.

Budget 2016: FM Jaitley may choose stability over growth!

Mumbai, Dec 17 () Former Reserve Bank Governor D Subbarao on Tuesday asked the government to ensure fiscal deficit is within the targeted number and warned that "fiscal profligacy" can lead to crisis situations.
 The comments weeks after official data indicated that the government has exhausted 107 per cent of the budgeted deficit gap of 3.4 per cent with five months to go for the fiscal end.
 "We got to be careful about managing our fiscal deficit and keep it within the fiscal deficit targets," Subbarao said.
 Speaking over a video link at the Times Network's India Economic Conclave here, he said a higher fiscal deficit fuels inflation, crowds out private investment and impairs Balance of Payments (BoP) by resulting in current account deficit-related issues.
 Subbarao said BoP-related issues, including the 1991 financial crisis and also the taper tantrums of 2013 during his governorship of the RBI can be traced back to "fiscal profligacy".
 "Both the quantum of fiscal deficit and quality of fiscal deficit are a cause for concern," Subbarao, under whose watch RBI used to regularly warn the government on fiscal deficit, said.
 He also said the "true picture" of the fiscal deficit may not be visible to all of us because of aspects like off-balance sheet borrowings by quasi-sovereign entities and also due to payment deferrals.
 Subbarao pointed out that the nominal GDP growth has fallen to as low as 6.1 per cent, and explained that it would have a direct impact on the revenue collections both at the Centre as well as the state level, which can impact the fiscal deficit situation.
 The bureaucrat-turned-central banker also said that adequate attention needs to be given to the quality of the fiscal deficit, maintaining that it is not bad for the governments to borrow to invest in capital expenditure. AA RAM

Former RBI chief Subbarao cautions against 'fiscal profligacy'

New Delhi, Dec 18 () With tax revenue slowing in a sputtering economy, some states on Wednesday suggested Finance Minister Nirmala Sitharaman to go for fiscal expansion and relax the deficit target to 4 per cent of the GDP.
 The finance minister in her July Budget reduced the fiscal deficit target to 3.3 per cent from an earlier 3.4 per cent for 2019-20. Keeping in mind its fiscal deficit target, the government has stayed with the borrowing plan for the fiscal as announced in the budget despite a sharp cut in corporate tax rate that is expected to cost Rs 1.45 lakh crore.
During the pre-budget consultation with Union Finance Minister, some states made a case for fiscal expansion by boosting consumption to tide over the sluggishness in the economy.
 "The biggest take home from Pre- Budget discussion of FMs is suggestion by Bihar and Kerala to raise the fiscal deficit limit to 4 per cent. It was agreed to large number of states. In current year real expenditure of states will decline- a crazy macro outcome in time of recession," Kerala Finance Minister Thomas Isaac said in a tweet after pre-budget meeting here.
 Some experts have already predicted that the fiscal deficit is expected to rise to 3.6-3.8 per cent of the GDP during the current fiscal due to weak revenue collections resulting from sluggish economic growth and government's sweeping corporate tax rate cut. 
 The country's fiscal deficit hit 102.4 per cent of 2019-20 Budget Estimate at Rs 7.2 lakh crore at the end of October. The fiscal deficit or the gap between expenditure and revenue was at Rs 7,20,445 crore as on October 31, 2019.
 Many economists, including former RBI Governor Raghuram Rajan, have expressed fear of India getting into a slow growth high inflation or stagflation mode.
 Rising food prices pushed retail inflation in November to an over three-year high of 5.54 per cent, while industrial sector output shrank for the third month in a row by 3.8 per cent in October, indicating deepening slowdown in the economy.
 India's economic growth slowed to a 6-year low of 4.5 per cent in the July-September quarter. With inflation rising, fears of stagflation -- a fall in aggregate demand accompanied by rising inflation -- have resurfaced. DP ANZ MR

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