India’s federal fiscal deficit marked a record of $88.5 billion in the second quarter, about 83.2% of the total target for the current fiscal year, signifying the devastating impact of the pandemic on government at its front-loaded spending and the declining tax collections. Economists have predicted the deficit to be a decrease of 7.5% in the 2020/21 fiscal year, much lower than the government prediction of a 3.5% decrease. The country’s economy is forecasted in decline between 5.1% and 9.1% under the worst case scenario in the current fiscal year, marking the weakest performance since 1979.
Data released by government last week showing a federal tax receipts between the month of April to June is sliding down more than 46% in year-on-year comparison, totalling in only 1.35 trillion rupees ($18.05 billion) from the previous year of 2.51 trillion rupees, although the taxes on fuel products have increased between the timeframe. Over Q2, the total expenditure increased 13% year on year from 7.22 trillion rupees in Q2 2019 to 8.16 trillion rupees as the government spending on rural job programmes and free food grains for millions of migrant workers has been increased.
India’s Coronavirus positive infection cases rocketed to 1.64 million while the death count rose to 35,747 by July 31. The over two-months long lockdown has also hurt economic activity in the country, giving direct impact on tax collections and the plan of raising revenues through state-owned company privatisations, economists said. India’s government has elevated its target for market borrowings to 12 million rupee throughout this fiscal year from the previous estimation of 7.8 trillion rupees to fund the budgeted spending.
