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India posts record fiscal deficit as coronavirus hits economy

India posts record fiscal deficit as coronavirus hits economy

India's fiscal deficit touched a record $88.5 billion in the AprilJune quarter, 83.2% of the target for the whole of the current fiscal year, reflecting the impact of the coronavirus pandemic on tax collections and as the government frontloaded its spending.

  • Reuters
  • Last Updated: July 31, 2020, 5:30 PM IST
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NEW DELHI India’s fiscal deficit touched a record $88.5 billion in the April-June quarter, 83.2% of the target for the whole of the current fiscal year, reflecting the impact of the coronavirus pandemic on tax collections and as the government front-loaded its spending.

The deficit is predicted by private economists to cross 7.5% of GDP in the 2020/21 fiscal year beginning April, from initial government estimates of 3.5%, due to a sharp economic contraction caused by the COVID-19 outbreak.

The economy is forecast to shrink 5.1% in the current fiscal year, and 9.1% under a worst-case scenario, according to analysts in a Reuters poll, its weakest performance since 1979.

Government data released on Friday showed total net federal tax receipts in three months through June declined more than 46% year-on-year to 1.35 trillion rupees ($18.05 billion), compared with 2.51 trillion rupees a year ago, even though taxes on fuel products have been increased.

The number of COVID-19 cases jumped to 1.64 million in India on Friday, while the death toll rose to 35,747.

Over three months, total expenditure rose 13% year-on-year to 8.16 trillion rupees, compared with 7.22 trillion rupees a year ago, as the government increased spending on free foodgrains and rural jobs programmes for millions of migrant workers.

Economists said a more than two months-long lockdown since late March has hurt economic activity in Asia’s third largest economy, impacting tax collections and the government’s plans to raise revenue through privatisations of state-run companies.

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New Delhi has increased its market borrowings target to 12 trillion rupees for the current fiscal year, from earlier estimates of 7.8 trillion rupees, to fund the budgeted spending.

Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor

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  • First Published: July 31, 2020, 5:30 PM IST
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