No change in fiscal deficit target for now, says FM Nirmala Sitharaman
Union Finance Minister Nirmala Sitharaman on Sunday said she hoped steep cuts in corporation tax rates would increase compliance, prompting her to stick to the fiscal deficit target for now. “A call will be taken at the RE (Revised Estimates) stage,” Sitharaman told mediapersons, two days after she announced big-bang tax reductions for companies.
The cuts would cost the exchequer Rs 1.45 trillion a year. She ruled out any expenditure cuts as of now, saying that her ministry was asking for a quick release of money by departments and ministries.
Even as bond yields went up after the announcement on Friday, the finance minister Nirmala Sitharaman said she had not taken a decision on revising the borrowing limit for the second half of 2019-20. She has also not considered going for foreign currency-denominated borrowings. The government has budgeted for Rs 7.1 trillion as gross borrowing in this fiscal year. Of this, Rs 4.4 trillion, or about 62 per cent of the total, is being borrowed in the first half.
Gross borrowings are almost equal to the Centre’s fiscal deficit in absolute terms. In proportion to GDP, the fiscal deficit is pegged at 3.3 per cent for FY20. The deficit has touched almost 78 per cent of the Budget Estimates in just four months of the year. Even before the cuts, direct taxes grew at a muted 5 per cent till about the middle of September, increasing the required growth rate to 27 per cent in the remaining part of the year from around 17 per cent assessed in the budgetary estimates…
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