Fiscal deficit widens to 7-yr high of 4.6% in FY20 as revenue collection falls

The country’s fiscal deficit soared to a seven-year high of 4.6 per cent of the Gross Domestic Product (GDP) in 2019-20 mainly on account of poor revenue realisation.

The previous high in fiscal deficit at 4.9 per cent of the GDP was recorded in 2012-13.

According to the data released by the Controller General of Accounts (CGA), the fiscal deficit in 2019-20 worked out to be 4.59 per cent of the GDP, up from 3.8 per cent projected in the revised estimates in February. The original estimate was 3.3 per cent.

The rise in the fiscal deficit, which is a reflection of the government’s borrowing, was mainly on account of subdued tax collection.

The revenue deficit also rose to 3.27 per cent, up from the revised estimate of 2.4 per cent of the GDP. The original estimate was 2.3 per cent.

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The governments decision to impose lockdown on March 25 to contain the spread of coronavirus had also hit revenue collection towards the close of the fiscal.

In absolute terms, total receipts of the government were Rs 17.5 lakh crore as against the estimate of ₹19.31 lakh crore.

The CGA data showed the government’s total expenditure was ₹26.86 lakh crore, lower than ₹26.98 lakh crore projected earlier.

Food subsidies during the last fiscal were ₹1,08,688.35 crore, the same as per the revised budget estimates.

However, total subsidies, including on petroleum, were lower at ₹2,23,212.87 crore from ₹2,27,255.06 crore estimated in the budget.

During 2018-19, the fiscal deficit was 3.4 per cent of the GDP. The government had said it would have restricted it to 3.3 per cent but for the income support to farmers.

The government had provided ₹20,000 crore towards the income support for 2018-19 while presenting the Interim Budget for 2019-20 (February 1, 2019).

While raising the fiscal deficit target to 3.8 per cent of the GDP from 3.3 per cent pegged earlier for 2019-20, the government had utilised escape clause under the Fiscal Responsibility and Budget Management (FRBM) Act which provides it leeway for relaxation of fiscal deficit roadmap during the time of stress.