Government Can Stick to Fiscal Deficit Target of 3.3% for Fiscal 2018-2019
The government will present an interim budget for 2019-20 to the parliament on 1st February 2019. The fiscal deficit and borrowings for 2018-19 provide a precursor to the budget for fiscal 2019-20 and also a reference point for the budget.
The focus of the market is on fiscal deficit and government borrowing, as these impact interest rates and liquidity in the economy. The government is targeting a fiscal deficit Government target for fiscal deficit is 3% of GDP in fiscal 2019-20 and the absolute number will depend on nominal GDP growth estimates.
The 1st advanced estimate of GDP by the CSO is nominal GDP growth of 12.1%, against budget estimates of 11.5%. Nominal GDP for fiscal 2018-19 is estimated at Rs 188,407 billion.
The government has targeted a fiscal deficit of 3.3% of GDP for fiscal 2018-19, which is Rs 6,217.44 billion (3.3% of nominal GDP). Budget estimate for fical deficit was Rs 6242 billion. As of December 2018, the government has overshot the fiscal deficit target by 114.8%. However, despite the overshooting of the fiscal deficit, the government can still stick to fiscal deficit targets by curtailing expenditure, increasing tax revenues through collection efforts, higher dividends from RBI and PSUs and stake sales. Read our Revenue report on Union Budget 2019-20 for details.
The government revised borrowing for FY 2018-19 is Rs 5,350 billion and given that borrowing finances around 65% of fiscal deficit (government is assuming high small savings collections, as normally borrowing finances over 80% of deficit), the government may not need to borrow more in this fiscal year despite shortfall in revenues.
Government Borrowing 2018-19
