Economy

At 4.6% of GDP, Fiscal Deficit for 2019-20 Breached FRBM Act Escape Clause

This is mostly due to lower-than-anticipated GDP growth and revenue collections across the board.

The Centre’s fiscal deficit for 2019-20 came in at 4.6% of nominal gross domestic product, as against a Revised Estimate of 3.8%, data showed on Friday.

This print, much beyond the escape clause allowed by the Fiscal Responsibility and Budget Management Act, is mostly due to lower-than-anticipated GDP growth and revenue collections across the board.

In her 2020-21 Budget, Union finance minister Nirmala Sitharaman had already used up the 0.5% escape clause to revise the fiscal deficit target for FY20 to 3.8% of GDP from 3.3%. For 2020-21, she has projected a fiscal deficit of 3.5% of GDP.

In absolute terms, fiscal deficit for FY20 came in at Rs 9.36 trillion, 122% of the Revised Estimates of Rs 7.67 trillion. This compared to 102% for FY19. Fiscal deficit in absolute terms reached Rs 10.36 trillion in April-February 2019-20 — implying that March saw a staggering fiscal surplus of Rs 1 trillion.

Also read: GDP Growth in Q4 FY’20 Falls to 3.1% as COVID-19 Pandemic Takes a Toll on Economy

Total revenue for FY20 was Rs 17.5 trillion, or 90.6% of Revised Estimates of Rs 19.32 trillion, compared with 91.4% for the same period last year. Net tax revenue for FY20 came in at Rs 13.56 trillion, which was 90 per cent of Revised Estimates. Non-tax revenue was Rs 3.26 trillion (94.4%), while non-debt capital receipts were just 84.1% of Revised Estimates, primarily on back of poor divestment receipts.

On the spending front, total expenditure was Rs 26.9 trillion, just short of the revised budget size of Rs 27 trillion. Revenue expenditure of Rs 23.50 trillion was at par with Revised Estimates while capital expenditure just fell short at Rs 3.37 trillion.

The CGA also released fiscal deficit data for April 2020, and it showed a clear contraction in revenue collections compared to April 2019, due to the COVID-19 pandemic and the nationwide lockdown. At Rs 2.8 trillion, fiscal deficit was 35.1% of the FY21 budgeted estimates of Rs 8 trillion, compared with 22.3% for the same period last year.

Net tax revenue for April was Rs 21,412 crore, compared with April 2019 collections of Rs 71,637 crore. Total revenue was Rs 27,183 crore, compared with Rs 94,930 crore for the same period last year. Expenditure for April was Rs 3.07 trillion compared with Rs 2.55 trillion in April 2019.

(By arrangement with Business Standard)