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Report pegs FY21 fiscal deficit at 6.8% of GDP
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SME Times News Bureau | 01 Jul, 2020
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 GDP, a report by a
brokerage firm said on Wednesday.
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
MGNREGA, PM Kisan and extension of PM Gareeb Kalyan Yojana till
November, 2020 has created a scenario where the deficit would widen.
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 two
months of current fiscal. Lower net revenue receipts and elevated
expenditure has pushed the fiscal deficit to 59 per cent of budget
estimate (BE) in the two month period of April-May. As a proportion to
BE, it is two-year high.
Moreover, Gross tax buoyancy is negative
with direct tax collection declining by 15 per cent yoy due to
deferment in tax filing date while indirect tax collection falling 52
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 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 62 per cent yoy on lower
mobilization of other non-tax revenue; receipts has also fallen to a
7-year low," Emkay said in its report justifying high deficit numbers
for this year.
The expectations of a significant increase in
telecom auction of Rs1 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 2 lakh crore looks
unrealistic. The gap between 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 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
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 PM Gareeb Kalyan
Scheme till November increases the food subsidy cost by another Rs
90,000 crore. Total increase in food subsidy due to various schemes is
Rs1.3 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.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
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66.20
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64.50 |
UK Pound
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87.50
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84.65 |
Euro
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78.25
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75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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