Here's why government will struggle to achieve its fiscal deficit target

The Modi government is all set to miss the fiscal deficit target of the running financial year with struggling economy and shortfall in the revenue generation due to lesser than expected receipts from Goods and Services Tax (GST). Moreover, another front where the government has failed to ensure revenues is the Disinvestments. As per a report in financial daily, Mint the central government is unlikely to complete the privatization of Air India Ltd, Bharat Petroleum Corp. Ltd (BPCL) and Container Corp. of India Ltd (Concor) by the end of current financial year which would mean that it will face w direct shortfall of around Rs. 40,000-50,000 crore.

Disinvestment target

The disinvestment target will be another task for them as it will directly hamper its fiscal deficit target of 3.3% of gross domestic product (GDP). Notably, the finance ministry is witnessing a downfall in the collection of both direct and indirect taxes. Further, the economy sinking to a six-and-half-year low of 4.5% in the September quarter has made it tougher for the government to achieve its fiscal deficit target. The government also announced a huge cut in the corporate tax for this financial which also has dented its revenues. The situation is so bad that even the states are also asking the central government to revise the combined fiscal deficits of states and the centre.

One of the finance ministry officials said, "There is a lot of interest in the market among investors for the companies on offer. The transaction may also be completed successfully, but now it looks difficult that the money will reach the coffers before 31 March. That is a challenge." The official further went on to add that the period of four-five weeks may be enough for the bidders to respond to the Expression of Interest documents which are under works but bidders may ask for more time. But the government may opt for showing the disinvestment proceeds in the revised estimate of 2019-20 "to maintain the books".

The International Monetary Fund (IMF) has also estimated that India may miss the fiscal deficit target by 50 basis points. But a report in Bloomberg states otherwise. The report argues that the central government is expected to miss the fiscal deficit target with a huge margin. With only three months left in the fiscal, it has only secured Rs 17,364 crore so far by selling its stake in state-run companies as which is only 16.6 percent of the targeted Rs. 1,05,000 crore.