'Govt to stick to fiscal glide path, tax revenues to be higher'

Last Updated: Sat, Nov 30, 2019 13:47 hrs
Bank (PTI photo)

New Delhi: The government will continue to follow the glide path to fiscal consolidation but would not cut any expenditure in the process as the entire exercise would become more targeted and efficient, government sources said on Friday.

Under the revised fiscal glide path, fiscal deficit is targeted at 3 per cent of GDP by FY21 and central government debt to 40 per cent of GDP by FY25.

Adhering to this schedule also eliminates the need for any additional market borrowing by the government.

Sources added that pressure on revenue may also ease from the third quarter when net tax proceeds would be higher.

"There will be no cut in expenditure, but the process will become more efficient eliminating lazy expenses. We are sticking to the fiscal glide path and that could mean no additional borrowing from the market. We are doing fine on the tax front and revenues have picked up nicely and net proceeds have been good," government sources said.

"The tax refunds were of course higher, but now settled and by the Q3-end (October-December ) net tax proceeds will be higher."

Stressing strict maintenance of fiscal deficit as decided in the Budget at 3.3%, sources said: "We follow the fiscal glide path on fiscal deficit indicator and this is important for inviting foreign investment and inflows."

The government has estimated the fiscal deficit for the current financial year at Rs 7.03 lakh crore, aiming to restrict the deficit at 3.3% of the Gross Domestic Product (GDP). The country's fiscal deficit hit 102.4% of the 2019-20 Budget Estimate at Rs 7.2 lakh crore at the end of October, government data showed on Friday.

Total revenue for the April-September period stood at Rs 9.3 trillion, or 44.9 per cent of the full-year target compared with 44.4 per cent for the same period last year.

Tax revenues came in at 41.4 per cent of the full-year target compared with 44.7 per cent last year.

Ratings agency Moody's Investors Service has projected Centre's fiscal deficit to be about 3.7 per cent of the Gross Domestic Product (GDP) in 2019-20. This will be slightly wider than the 3.4 per cent posted in fiscal 2019 on the persistent spending pressures. A slower economic growth will result in continued widening of the fiscal deficit.

The second quarter GDP numbers which were also released on Friday showed GDP grew at 4.5%. The growth for the first quarter stood at 5%. In gross value added terms, the economy grew at 4.3 per cent compared to 4.9 per cent in the previous quarter.

Core sector output for October contracted further to 5.8%. The index was dragged down by electricity which reported a de-growth of 12.4% vs -3.7% in September.

In the midst of all this a new concern has surfaced for the government: the fiscal deficit target has been breached. The fiscal deficit for the period April-October was recorded at 102.4% crossing the full-year target.