Government is staring at a ballooning fiscal deficit against an initial estimate of 3.5 per cent of GDP in the current financial year as the coronavirus shrinks jobs and hits tax collection, government data showed on Wednesday.
The federal fiscal deficit for the five months through August stood at Rs 8.7 lakh crore, or 109.3 per cent of the budgeted target for the current fiscal year ending in March 2021.
Net tax receipts in the five months through August declined by about 30 per cent year on year to Rs 2.84 lakh crore, even though fuel taxes rose.
The deficit is predicted to exceed 8 per cent of GDP in the 2020/21 fiscal year, economists said, mainly due to a sharp economic contraction triggered by the pandemic.
"Five months of data reveal a sordid tale," said Aditi Nayar, economist at ICRA, the arm of Moody's rating agency, adding the deficit for the whole year could spike to Rs 14 lakh crore against budgeted estimate of Rs 8 lakh crore.
The government has not officially revised the fiscal deficit target so far for the whole fiscal year.
Asia's third-largest economy is forecast to shrink up to 10 per cent in the current fiscal year, according to estimates by several private economists, its weakest performance since 1979.
In May, the government increased its borrowing target to Rs 12 lakh crore from an earlier budgeted Rs 7.8 lakh crore through bonds for the 2020/21 fiscal year.
The number of COVID-19 cases crossed 6.2 million on Wednesday, second only to the United States, while the death toll rose to 97,497.
Over five months, total expenditure rose 5.9 per cent year-on-year to Rs 12.5 lakh crore as the government increased spending on grain and rural jobs programmes for millions of migrant workers.