By March 2019, India is set to miss its fiscal target due to the shortage in revenues and lower-than-targeted disinvestment proceeds, which is reported by India Ratings and Research on Monday. India’s 2019 fiscal deficit target has been hanged at 3.3 percent of its gross domestic product (GDP), which is counted as 6.24 trillion rupees ($88.45 billion). But the credit rating agency projected fiscal deficit at 6.67 trillion or 3.5 percent of its GDP.
Prime Minister Narendra Modi is looking forward to a second term next year but his plans of keeping the fiscal deficit at 3.3 percent of GDP have come under a huge pressure due to a muted response from the goods and services tax (GST) by adding up the welfare benefit schemes, especially for the farmers in the 2019 general elections. Last year the unexpected roll-out has hit businesses hard and led to uncertainty around the revenue collections. Even after the reforms that are helping plug leakages in GST collections, combining the indirect tax collections grew to only 4.3 percent in the first half of the year, comparing with the targeted growth of 22.2 percent for the full year.
One of the analysts of India Rating said, “The pressure on government finances is mainly arising from the revenue side, particularly from indirect taxes and non-tax revenue”. However, Subhash Chandra Garg, Secretary of Economic Affairs in the Finance Ministry said that the government would only stick to its fiscal deficit target for the year. It has been noticed that India’s GST collection for fiscal 2017/18 was 98 percent of the planned target. The government is also likely to miss its disinvestment target of 800 billion rupees in 2019 that it had received at the end of October around152.47 billion, which is said by India’s Rating. India had to cancel its plan to sell a 76 percent stake in state-owned carrier Air India due to the absence of interest from dealers. It is a hindrance not only in its exertions to release the ailing airline but also for its goal to cut the fiscal deficit.