India to breach fiscal deficit target: Fitch

New Delhi, May 7

India is likely to breach its fiscal deficit target in the financial year to March 2022 mainly due to revenue shortfall, Fitch Solutions said on Friday.The government is targeting a deficit between revenue it earns and what it spends at 6.8% of the GDP in FY22 (April 2021 to March 2022).

“We at Fitch Solutions forecast the Indian Central government deficit to come in at 8.3% of GDP in FY22,” it said.

“Revenue shortfall remains the main driver of our wider deficit view, as we expect the government to maintain its spending targets.” Fitch Solutions had previously projected a fiscal deficit of 8%.

Pegged at 8.3% of GDP

• The government is targeting a deficit between revenue it earns and what it spends at 6.8% of the GDP in FY22 (April 2021 to March 2022)
• However, Fitch has forecast the fiscal deficit at 8.3% of GDP in FY22

“The main driver of our deficit forecast revision is a downward revision to our outlook for revenues, given that the flare-up in Covid cases in India and containment measures in place will hamper India’s economic recovery, which will have a negative impact on fiscal revenues,” it said.

The Central government’s expenditure is likely to be around the project of Rs 34.8 lakh crore as it looks to maintain its high pandemic-period spending so as to bolster pace of economic recovery.

However, revenue is likely at Rs 16.5 lakh crore, down from estimate of Rs 17.8 lakh crore on the back of an impaired outlook for India’s economic recovery in FY22 as a result of the ongoing health crisis. — PTI

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