India risks missing 3.3 pc fiscal deficit target if tax revenue underperforms: Moody's

Moody's Friday said there are risks of India missing 3.3 per cent fiscal deficit target for the current financial year if tax revenue falls short of projection. The Budget 2019-20 lowered fiscal deficit projection for the current financial year to 3.3 per cent from 3.4 per cent targeted in the Interim Budget 2019-20 in February. The fiscal deficit, which is the gap between government expenditure and revenue, was 3.4 per cent in 2018-19.

"There's a risk that India could miss its deficit target for fiscal 2019 if income from tax revenue underperforms projections, as it did last year," Moody's Investors Service Associate Managing Director (Sovereign Risk Group) Gene Fang said. The rating agency, however, said the headline deficit may be achieved but through reliance on one-off revenue such as disinvestments and transfers from the central bank, and off-budget spending.

The government has pegged disinvestment target for the current financial year at Rs 1.05 lakh crore, up from Rs 90,000 crore projected in Interim Budget for 2019-20 in February. Moody's said that in the Union Budget, the government announced a lower fiscal deficit target for fiscal 2020, while maintaining its support for growth and incomes.

"Achieving these competing goals will be challenging. We expect the economy to grow relatively slowly, despite the government's income support measures," Fang said. In addition to funding, an expansion of support for farmers, a new pension scheme and relief for small taxpayers, as previously announced, the latest Budget includes a Rs 70,000-crore recapitalisation of state-owned banks.

"This will support growth by encouraging the flow of credit to the economy, although simultaneously adding to government debt," Fang said.