scorecardresearch
Thursday, March 28, 2024
Support Our Journalism
HomeEconomyGovt revenues could fall short by Rs 4 lakh crore, little space...

Govt revenues could fall short by Rs 4 lakh crore, little space for stimulus: India Ratings

Revenue shortfall will be equivalent to the additional government borrowings, the agency estimates, expecting a contraction in both tax and non-tax revenue.

Follow Us :
Text Size:

New Delhi: India is staring at a revenue shortfall of nearly Rs 4 lakh crore that could eliminate the entire fiscal space opened up by the additional borrowings for a fiscal stimulus amid the Covid-19 crisis, India Ratings and Research Ltd said in a note Friday.

The Ministry of Finance has said India will borrow Rs 4.2 lakh crore, over and above the Rs 7.8 lakh crore initially budgeted for the fiscal 2020-21.

However, with economic activity coming to a virtual standstill for nearly two months this financial year, the borrowings are expected to only compensate for the shortfall in tax and non-tax revenues.

India Ratings has projected that the total revenue shortfall faced by the Narendra Modi government this fiscal will be around Rs 4 lakh crore as both tax and non-tax revenues are likely to fall sharply.

The ratings agency also pointed out that net tax revenues or the total tax revenues after providing for the states’ share will fall by more than Rs 2.5 lakh crore, despite the higher excise duty on petrol and diesel. In addition, non-tax revenues could also slump by Rs 1.48 lakh crore as dividend and profits of state-owned firms get affected due to the halt in economic activity.


Also read: Modi govt’s ‘One Nation One Ration Card’ is same UPA scheme that Sonia-led NAC shot down


No space for fiscal stimulus

Authored by India Ratings chief economist Devendra Pant, the report pointed out that the Modi government’s announcement of increase in the borrowings for 2020-21 “will largely take care of the revenue shortfall, leaving little space for fiscal stimulus, unless the Centre sharply cuts the budgeted capex and reprioritises expenditure”.

The revenue shortfall will account for 95.1 per cent of the increased borrowings, leaving a purse of just around Rs 20,000 crore for the central government to provide a fiscal stimulus.

This is too small an amount to make any difference to the sagging economic activities or demand, said the report, adding the Modi government faces a massive challenge.

Govt package

In the last couple of days, Finance Minister Nirmala Sitharaman has announced support measures of more than Rs 8 lakh crore to different segments like micro, small and medium enterprises, migrant labourers and street vendors and traders.

However, most of the measures were credit-focussed, relying heavily on banks to improve the flow of credit to these segments. Economists estimate that the fiscal impact of these measures will be very little — in the range of Rs 30,000 crore to Rs 70,000 crore.

Earlier this week, Prime Minister Narendra Modi had announced that India’s economic package to battle the impact of Covid-19 will be around Rs 20 lakh crore or 10 per cent of India’s gross domestic product, including all measures announced by the government and the Reserve Bank of India.


Also read: Modi’s stimulus speech adds to a sense of uncertainty. And that kills investment


 

Subscribe to our channels on YouTube, Telegram & WhatsApp

Support Our Journalism

India needs fair, non-hyphenated and questioning journalism, packed with on-ground reporting. ThePrint – with exceptional reporters, columnists and editors – is doing just that.

Sustaining this needs support from wonderful readers like you.

Whether you live in India or overseas, you can take a paid subscription by clicking here.

Support Our Journalism

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Most Popular