COVID-19 fallout: Fiscal deficit may rise 6.8 pc of GDP in FY21


New Delhi, Aug 3 | With economic disruptions set for a long haul due to COVID-19 pandemic, India could see its fiscal deficit this year to balloon to over 6.8 per cent of Gross Domestic Product (GDP), brokerages analysing the first quarter deficit numbers have said.

The Controller General of Accounts on Friday said that country’s fiscal deficit has expanded to 83 per cent of Budget Estimate in the April-June quarter primarily due to lower tax collection and higher expenditure for COVID-19 relief.

According to a report on Indian economy by Emkay Global Financial Services, low economic activity and lower tax collections coupled with expanded expenditure in schemes like Mahatma Gandhi Rural Employment Guarantee Act (MGNREGA), PM-KISAN and extension of Pradhan Mantri Garib Kalyan Yojana (PMGKY) till November, 2020 has created a scenario where the deficit would widen.

The current expansion (in deficit), the brokerage said, is primarily due to low economic activity in the last two months (e-way bill 7 per cent lower than last year in June-end) and an extension of the tax filing deadline to Aug’20.

“Capital spending has surged 40 per cent due to ways and means advances for FCI (high procurement) and road spending (base effect due to low spending in Q1FY19 due to elections); excluding these two, spending has declined by 4 per cent,” Emkay has said in its report.

The fiscal deficit is the total amount by which the government’s expenses for a year exceeds its revenues.

The concern on the deficit comes from the trend witnessed in the first quarter of current fiscal. Lower net revenue receipts and elevated expenditure has pushed the fiscal deficit to 83 per cent of budget estimate (BE) in the three month period of April-May.

Moreover, Gross tax buoyancy is negative as direct tax collection declined 31 per cent yoy due to deferment in tax filing date, and indirect tax collection fell 34 per cent yoy due to deferment in GST fillings and abnormally low economic activity.

We believe that gross tax collection to fall 5.3 per cent yoy in FY21e due to a sharp slowdown in the nominal GDP growth. The ‘Vivad Se Vishwas’ scheme has been factored in this assumption.

“We believe that gross tax collection to fall 5.3 per cent yoy in FY21, on a sharp slowdown in the nominal GDP growth. Vivad Se Vishwas scheme has been factored in this assumption. Non-tax revenue collections have also declined by 55 per cent yoy on lower mobilization of economic receipts,” Emkay said in its report justifying high deficit numbers for this year.

The expectations of a significant increase in telecom auction of Rs one lakh crore is also unrealistic. We believe that a shortfall for the same would be Rs 75,000 crore. There has been no disinvestment activity so far, and the target of Rs two lakh crore looks unrealistic. The gap between National Saving Schemes (NSS) rates and deposits rates have again widened to 120bps, which again gives an edge to NSS instruments over bank deposits, the brokerage report said.

The government has used the escape clause in Fiscal Responsibility and Budget Management Act (FRBM Act) for FY20 and FY21 as fiscal deficit has been expanded by 0.5 per cent of the target to 3.8 and 3.5 per cent of respectively.

Emkay said that the seriousness of the revenue position could be seen from 20 per cent decline in e-way bill over last year. Expenditure has largely declined on subsidies, whereas it has expanded on MNREGA, PM Kisan and transfers to the states (which were preponed this year).

Also, the extension of PMGKY till November increases the food subsidy cost by another Rs 90,000 crore. Total increase in food subsidy due to various schemes is Rs 1.3 lakh crore.

According to the estimates done by the brokerage, overall tax collections of the Centre would have shortfall of Rs 3.2 lakh crore.

For the current fiscal governments borrowings target has already been raised by over 50 per cent as additional expenditure and funding needs to stimulate the economy hit by COVID-19 pandemic has pushed up need to mobilise resources.

Accordingly, the estimated gross market borrowing in the financial year 2020-21 has now been set at Rs 12 lakh crore in place of Rs 7.80 lakh crore as per budget estimate for current year.

Source: IANS

Sponsors Posts

Policybazaar Unveils its new brand campaign "AapKiSideHai"

Policybazaar Unveils its new brand campaign

Akshay Kumar delivers the brand’s promise of always being on the customer’s side

Gurugram, 19th Sept, 2020: (Twitter handle: PolicyBazaar), India’s largest online insurance marketplace with over 10 million customers, showcases its commitment to customers in its new television campaign “AapKiSideHai”. The new ad campaign featuring Policybazaar brand ambassador, Akshay Kumar, highlights the brand’s promise of embracing a holistic customer centric approach while helping to bridge the insurance protection gap in India.

Policybazaar’sAapKiSideHai campaign seeks to reassure its customers on being a dependable Insurance partner for them, every step of the way. The brand has always focused on distributing products like term insurance, health insurance, zero commission ULIP’s and motor insurance that are optimal from a customer perspective. Policybazaar is now extending the brand promise beyond the purchase experience to ensure that consumers get the highest levels of service throughout the policy lifecycle.

The new brand campaign reinforces Policybazaar core value of putting the customer first by delivering on its promise of providing a trusted platform for all types of insurance products. The brand is committed to guiding the customer throughout the insurance journey, starting from recommending the right products at affordable pricing, ensuring thatthe policy issuance process is smooth and fast, and, to providing services and claims assistance when needed.

“While we continue to highlight the importance of Health & Term life Insurance through our marketing campaigns, with the brand promise of Policybazaar AapKiSideHai, we also intend to position Policybazaar as a customer centric brand, that is committed to stand by its customers, both pre and post purchase”, said Samir Sethi, Head of Brand Marketing, The new ad series highlights Policybazaar’s unparalleled support to customers, while providing them with the ease of comparing and buying term and health plans online with guidance at each & every step.

Speaking about the TVC launch, Sharat Dhall, Chief Operating Officer, said, “Our ultimate aim is to provide 360-degree assistance to customers that starts from when the policy is bought, to provide assistance when the claim is paid out, should such a situation arise. Winning and maintaining customer trust is a strong ethos within the company and this campaign reflects that. At a time when the world is grappling with a crisis like no other, the brand intends to instill confidence in the customers’ buying decisions by assuring them protection of their futures with the right insurance products & thorough assistance throughout the journey.”

The new brand campaign in its series displays moments of indecision that people may have while investing in protection products. It addresses these queries &emphasizes the importance of nurturing a bond with the consumers thereby creating customer delight.


Please enter your comment!
Please enter your name here