India’s 2018-19 fiscal deficit at 3.39% of GDP, lower than target

India met its fiscal deficit target for 2018-19, which came in at 3.39 per cent of gross domestic product (GDP), slightly lower than 3.4 per cent estimated in the revised estimates of the budget, on the back of an increase in non-tax revenue and lower expenditure, official data showed.

As per the data released by Controller General of Accounts (CGA), in absolute terms, the fiscal deficit at the end of March 31, 2019, stood at Rs6.45 lakh crore as against Rs6.34 lakh crore in the revised estimates of the budget.

Although the fiscal deficit in absolute terms has gone up, as a percentage of GDP, the deficit figure has come down marginally, mainly on account of GDP expansion in 2018-19.

According to Devendra Kumar Pant, Chief Economist, India Ratings and Research (Fitch Group): “FY19 fiscal deficit at 3.4 per cent of gross domestic product (GDP) is in line with government’s revised fiscal deficit target. However, in absolute term the provisional fiscal deficit in FY19 has widened from revised estimate by Rs109.69 billion.”

“Although the FY19 GDP numbers released has helped in achieving 3.4 per cent fiscal deficit target, even with the GDP used at the time of budget preparation would have led to fiscal deficit of GDP within 3.4 per cent.”

Besides, the data showed that India’s budgetary fiscal deficit in April 2019-20 period stood at 22.3 per cent or Rs1.57 lakh crore of the Rs7.03-lakh crore annual target.

The CGA data showed the fiscal deficit during the corresponding period of the previous fiscal was 24.3 per cent of that year’s target.

In April, the government’s total expenditure stood at Rs2.54 lakh crore (9.1 per cent of the budget estimates) and total receipts were Rs94,930 crore (4.8 per cent of the budget estimates).

In the same period of 2018-19, it was 4.1 per cent of budgeted estimates received.

Of the total expenditure in this period, Rs2.24 lakh crore was on revenue account and Rs30,588 crore on capital account.

Meanwhile the India’s economy grew at a much-lower-than-expected 5.8 per cent in the January-March period, its slowest pace in 17 quarters, and falling behind China’s pace for the first time in nearly two years, data showed on Friday.

The slowdown will put pressure on Prime Minister Narendra Modi’s re-elected government and the central bank to provide stimulus through fiscal measures and interest rate cuts.

Nirmala Sitharaman, who assumed charge as the finance minister on Friday, is expected to deliver some tax cuts in her first full-year budget in early July while keeping the budget deficit close to target. The Reserve Bank of India is expected to reduce interest rates at its June meeting.

A Reuters poll of economists had forecast a growth rate of 6.3 per cent for the March quarter, compared with a 6.6 per cent rise in the October-December period in 2018.

Weaker consumer demand and slower growth in investments were blamed for the slowdown. Private investment grew 7.2 per cent in the March quarter, down from 8.4 per cent in the previous quarter, while investment growth slowed to 3.6 per cent from 10.6 per cent, the data showed.

Economists said growth could slow further in the current quarter, the first of the fiscal year, citing weakening global growth as a depressing factor. The slowdown would “lead to pressures” for fiscal stimulus, including tax cuts on fuel products to boost consumption, said NR Bhanumurthy, an economist at the National Institute of Public Finance and Policy, a Delhi-based think-tank.

The Statistics Ministry also revised its estimate for growth in the fiscal year ending March 31 to 6.8 per cent from a previously projected 7 per cent.

The government is already considering rolling out a slew of ‘big-bang’ economic reforms in the first 100 days of Modi’s second term, with a focus on privatisation of state assets and relaxation of labour and land rules for businesses, a top official at the government’s main think tank told Reuters.

Several indicators - automobile sales, rail freight, petroleum product consumption, domestic air traffic and imports - indicate a slowdown in domestic consumption.

The farm sector contracted 0.1 per cent in the March quarter compared with 2.7 per cent growth in the previous quarter, while manufacturing grew 3.1 per cent, slower than 6.7 per centin the previous quarter.

Corporate earnings hit a six-quarter low growth rate of 10.7 per cent during January-March on weakening consumer sentiment and softening commodity prices, ICRA, the Indian arm of the ratings agency Moody’s, said on Tuesday, citing a sample of more than 300 companies.

Meanwhile, India’s unemployment rate hit a 45-year high of 6.1 per cent last year, according to delayed official figures released on Friday.

Agencies