InvestorQ : How is the total fiscal deficit of the government likely to pan out in the coming 3 months and how much overshooting you expect for FY21?
ishika Banerjee made post

How is the total fiscal deficit of the government likely to pan out in the coming 3 months and how much overshooting you expect for FY21?

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8 months ago
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It now looks increasingly likely that the total fiscal deficit of the central government for the fiscal year 2020-21 will inch closer to 7%. In Union Budget 2020, the government had projected fiscal deficit of 3.5% of GDP. However, the fact that the government borrowing limit was revised from Rs.7.8 to Rs.12 trillion indicates the stress on finances.

The fiscal deficit at more than 7% would be higher than what most economists had originally projected. In fact, most economists had estimated an uptick in tax collections in the second half of FY21 but that is yet to show evidence. Revenue collections of the government had suffered sharply due to the complete lockdown in the first 3 months to Jun-20.

While there are no final numbers, experts are estimating that the actual revenue shortfall from direct taxes, indirect taxes and from divestment inflows could fall of budget targets by nearly Rs.7 trillion. Even government sources have admitted that government finances were in poor condition because of the shortfall in tax receipts and if states are added it could be worse than what is evident today. In fact unofficial estimates even peg GFD at 8% of GDP.

All eyes will be on Nirmala Sitharaman on 01-Feb when she is expected to announced the actual fiscal deficit numbers for FY21.

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