India’s fiscal deficit crossed a record $88.5 billion in the April-June period, 83.2 per cent of the target for the current fiscal year as a whole, reflecting the effect of the coronavirus pandemic on tax collections and the front-loading of government spending.
Private analysts are forecasting that the deficit will reach 7.5 percent of GDP in the 2020/21 fiscal year starting in April, from initial government forecasts of 3.5 per cent, owing to a rapid economic recession triggered by the Covid-19 outbreak.
According to analysts in a Reuters survey, the economy is expected to contract 5.1 percent in the current fiscal year, and 9.1 percent in the worst-case scenario, the worst result since 1979.
Government data released on Friday showed overall net federal tax receipts declining more than 46 percent year-on-year to 1,35 trillion rupees ($18.05 billion) compared to 2,51 trillion rupees a year earlier, while taxes on petroleum products have increased.
On Friday the number of COVID-19 cases rose to 1.64 million in India, while the death toll increased to 35.747.
Over three months, overall spending rose year-on-year by 13 percent to 8.16 trillion rupees, compared to 7.22 trillion rupees a year earlier, as government spending on free food grains and rural employment programs rose to millions of migrant workers.
Economists have said that a more than two-month lockdown since late March has damaged economic activity in Asia’s third-largest economy, impacting tax collections and government plans to raise revenue through privatization of state-run companies.
New Delhi has raised its market borrowing target to 12 trillion rupees over the current fiscal year, from earlier estimates of 7.8 trillion rupees to finance the spending budgeted.