‘Sharp increase in FY19 fiscal deficit could dampen market sentiment’

 

New Delhi, Jan 31: As it is an Interim Budget, analysts and economists do not expect much from it. But as it is a polling year, the major focus could be to boost the rural economy. The Interim Budget will be presented on February 1 and the full budget will be in July-August.
Generally, in every budget, the fiscal deficit as a percentage of GDP (gross domestic product) is keenly watched by Foreign Institutional Investors (FIIs) and institutional investors. It is also one of the main stimuli for the sovereign rating.
Likely higher pre-election spending could pose a risk to the fiscal deficit and would increase debt burden, said experts.
Most experts said this time the government is likely to exceed its fiscal deficit target of 3.3 percent set for financial year 2018-19 due to a shortfall in GST collection. However, some experts opined the government may manage to meet the target.
They further said the key things to watch out for would be FY20 target as the government last year said it would try to keep 3 percent of GDP in FY20, which looks difficult considering the government spending.
“With GST collection consistently remaining below the target and direct tax as well as other sources of revenues remaining closer to or lower than the target, fiscal deficit for FY19 is set to be higher than targeted Rs 6.24 lakh crore or 3.3 percent of the GDP,” Shailendra Kumar, Director and CIO at Narnolia Financial Advisors said.