While the government reiterated its commitment of achieving the fiscal deficit target of 3 per cent of gross domestic product (GDP) by 2020-21 (FY21), it has nominally revised upwards the fiscal deficit to 3.4 per cent for 2018-19 (FY19) and 2019-20 (FY20), despite a sizeable outlay on the income-support scheme for small farmers aggregating to Rs 20,000 crore in FY19 and additional Rs 75,000 crore for FY20.
The overall revenue receipt growth is budgeted at 14 per cent. However, growth in some of the revenue receipts such as the central goods and services tax (CGST) has been assumed much higher at 21 per cent, in addition to sizeable disinvestments target of Rs 90,000 crore. Despite sizable outlay on the income-support scheme, the expenditure growth is projected at 13.4 per cent or Rs 3.27 trillion for FY20. We believe some of the other expenditure such as bank recapitalisation, petroleum, and fertiliser subsidy to require an upward revision that will push the overall expenditure. Accordingly, we expect further increase in the budgeted expenditure for FY20 and put pressure on fiscal deficit unless a higher than projected growth in revenue materialises.
Naresh Takkar, Managing director and group chief executive officer, Icra
The mobilisation from the small saving scheme is budgeted at Rs 1.52 trillion, which has resulted in a limited increase in net market borrowing of Rs 4.73 trillion for FY20 as against Rs 4.22 trillion for FY19. The ability to mobilise budgeted amount through small savings will be important for market borrowing programme of the GoI and yields in the debt market.
Further, the quality of expenditure is also showing signs of deterioration with capital expenditure rising by only 6 per cent whereas revenue expenditure is projected to rise by 13.4 per cent, which is expected to be inflationary.