Govt may breach fiscal deficit target; need for stimulus rises: Report

The government has set a 3.3 per cent fiscal deficit target for the current fiscal.

The government might breach the fiscal deficit target this financial year amid drop in the revenue mobilisation and expected additional expenditure by the government, says a report. According to Dun & Bradstreet’s Economy Forecast, the need for fiscal stimulus has increased even as the government finances remain “strained”.

“We expect that the drop in the revenue mobilisation of the government and likelihood of additional expenditure by the government might breach the fiscal deficit target in FY20,” Dun & Bradstreet India Chief Economist Arun Singh said. The government has set a 3.3 per cent fiscal deficit target for the current fiscal.

Singh further added that given the resources constraints, increase in fiscal deficit might lead to crowding out of private investments. According to the report, corporate liabilities are already higher. The balance-sheets of corporates, government, banks and households remain constrained or weak and revenue collection will play an important role.

“Revenue collection will thus be important for the government to implement a fiscal stimulus. To do that, tax reforms are needed. GST should be simplified further, and direct tax collections should increase,” Singh said. As per the report, the index of industrial production is likely to remain subdued in the short to medium term amid slowdown in demand, lackluster investment and weak exports….