FY22 fiscal deficit may improve at 6.6% on stronger tax

FY22 fiscal deficit may improve at 6.6% on stronger tax

Fitch Ratings has said that even if the disinvestment target in the budget is not met, the Center may improve its fiscal deficit at 6.6 per cent of GDP in the current fiscal on a stronger than expected revenue buoy.

The international rating agency last week kept the sovereign rating unchanged at ‘BBB-‘ with a negative outlook, and said the risks to India’s medium-term growth outlook are likely to stem from a rapid economic recovery from the pandemic and easing financial sector pressure. with less.


In an email interview with PTI, Jeremy Zook, Director (Asia-Pacific Sovereign) of Fitch Ratings said that two major positive triggers that could revise the outlook to stabilize are one to reduce the debt burden. Implementation of a credible medium-term fiscal strategy and high medium-term investment and growth rates without creating macroeconomic imbalances, such as successful structural reform implementation and a healthy financial sector.

“We anticipate that the central government will achieve a deficit of 6.6 per cent of GDP in the current fiscal, largely as a result of a higher-than-expected revenue buoyancy. We estimate that the government falls short of its budget target. disinvestment,” said Zook.

In the Budget for 2021-22 (April-March), presented on February 1, the government had pegged the fiscal deficit, or the gap between the Centre’s spending and revenue, at 6.8 per cent of GDP, or Rs 15.06 lakh crore.

At the end of September, which is six months into the fiscal year, the fiscal deficit touched 35 per cent of the budget estimate.

Revenue Secretary Tarun Bajaj has said that on the back of good direct and indirect tax collection, the government’s tax collection will exceed the budget estimates for this financial year.

“Even after refunds, we have touched almost Rs 6 lakh crore in direct taxes till October… It is looking good. Hopefully, we should cross it.

“Though we have given a lot of relief in indirect taxes in petrol, diesel and edible oil, there are some sunsets that have come in customs duty where the total profit will be around Rs 75,000-80,000 crore. But, still, I think we should get direct and Both indirect taxes should be higher than the budget estimate.”

With regard to disinvestment, there is a collection of Rs 9,330 crore so far against the budget target of Rs 1.75 lakh crore.

When asked when Fitch expects India’s rating outlook to stabilize, Zook said, “We do not have a specific timetable to address the negative outlook, which may result in a rating downgrade or outlook at the current rating level.” We generally aim to resolve such approaches within a time frame of two years but it may take longer ”

India’s general government debt increased to 89.6 percent of GDP in FY 2011. Fitch forecasts the ratio to drop slightly to 89 per cent, which is still well above the ‘BBB’ average of 60.3 per cent in 2021. According to the rating agency, the debt ratio should fall to 86.9 per cent by FY26 (ending March 2026).

“Two major positive triggers could lead to a revision of the outlook to stabilize. First, the implementation of a credible medium-term fiscal strategy to bring down the post-pandemic general government debt to the level of ‘BBB’ category counterparts. is for.

“Second, high medium-term investment and growth rates without the creation of macroeconomic imbalances, such as from successful structural reform implementation and a healthy financial sector,” Zook said.

Zook also said that an upcoming review will assess these triggers.

“Conversely, a downgrade may result from negative triggers, namely, failure to keep the general government debt-GDP ratio on a downward trajectory or a structurally weak real GDP growth outlook, for example, continued financial-sector weakness.” Or because of improved implementation. There is a shortage,” Zook said.

(Only the title and image of this report may have been reworked by Business Standard staff; the rest of the content is generated automatically from a syndicated feed.)

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