Finance Minister Arun Jaitley said that higher tax refunds are putting pressure on the fiscal deficit. In the first six months of the current financial year, the Central Government’s fiscal deficit has shot up to 83 per cent of the Budget target.
“Higher tax refunds are getting reflected in the fiscal deficit number. This year there were pending tax refunds estimated at around ?1.20 lakh crore,” Jaitley told reporters here. The fiscal deficit is the difference between the income and expenditure of the Government.
While stating that the direct tax target was achievable, he said that meeting the indirect tax target would be challenging. “We will strive to achieve the fiscal deficit target for this financial year,” he said.
The Government wants to restrict the fiscal deficit to 4.1 per cent of gross domestic product (GDP) or ?5.31 lakh crore. However, the data released by the Controller General of Accounts (CGA) on Friday showed that it has reached ?4.39 lakh crore in the April-September period.
Interestingly, expenditure during the first six months was 48 per cent of the Budget target as against 48.6 per cent during same period last fiscal. But, total receipts reached only 33.5 per cent, which impacted the fiscal deficit.
Commenting on the deficit numbers, Aditi Nayar, Senior Economist with ICRA, said that with tax revenue growth falling short of the budgeted target in the first half, revenue buoyancy will crucially hinge upon the success of the telecom auction and disinvestment offerings in the remainder of this fiscal year.
Addressing a meeting of the Consultative Committee during the day, Jaitley said that the Government expects the growth to be in the range of 5.5-5.9 per cent. He also expressed hope that the recent decline in international oil prices and domestic food items point towards lower inflation in the coming months.
The Government has set a target of ?7.36 lakh crore for direct taxes, with a growth rate of 15 per cent. Gross direct tax collection between April 1 and October 20 was ?3.78 lakh crore, up 13.6 per cent. Out of this ?80,850 crore was paid as refunds.
“In addition to the recently announced fiscal prudence measures, savings related to the budgetary allocation for food subsidy and fuel subsidies will ease the pressure on non-Plan revenue expenditure in the second half,” Nayar said.