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Indian Economy

Fiscal Deficit Woes

Rupee

An important macroeconomic indicator that matters but does not often connect with the common man is the fiscal deficit target. It is an important parameter to assess how well the government budgets its revenue and expenditure. Hence, if the total expenditure is greater than the total revenue, the government needs to bridge this gap by borrowing money.

Being expressed as a percentage of GDP, the Modi led BJP government had set a target for a fiscal deficit of 3.3% of GDP or Rs 6.24 lakh crore for itself for the financial year ending 31st March 2019. However, by November of 2018 itself, the fiscal deficit surpassed its target and stood at 114.8% of its full-year estimate which translates into a Rs 7.16 lakh crore deficit.

Fall in GST collections, lower than expected disinvestment receipts, farm loan waivers, MSP hikes, disappointing IIP numbers and populist spending measures adopted by the government being an election year, all add to the overall expenditure and are putting further strain on the fiscal deficit.

A majority of recently polled analysts and experts also believe it will be very difficult for the government to meet its target. However, Finance Minister Arun Jaitley still firmly believes that the government can meet this target by ramping up its revenue. It is a matter of pride for the government to meet its fiscal deficit target and show that it is capable of meeting its budgeted expenditure.

 

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