India’s Fiscal Deficit at 58 Percent of Full Year Target in Two Months as Country Ups Covid Spend

New Delhi (Sputnik): India’s Gross Domestic Product growth to 3.1 percent in Q1 2020 compared with 4.7 percent in Q4 2019. At 3.1 percent, GDP growth is almost half the 5.8 percent seen in Q1 2019.

India’s fiscal deficit in the first two months of the current financial year (April – May) stood at $61.67 billion. This is 58.6% of the budgeted target for the current fiscal year (April 2020 – March 2021). The data shows that the government has stepped up expenditure even as revenue is subdued, accounting for higher deficit.

Fiscal data released by the government on Tuesday indicates that during the first two months of the current financial year, (April and May), the government received net tax revenues of $4.48 billion. However, the total expenditure by the government reached $68.26 billion.

Macroeconomic experts believe that the situation will improve. “The current numbers indicate that the fiscal deficit is high owing to low tax revenues. As lockdown is opening, government revenues will go up going forward. These numbers are only for two months and going forward it will change,” an observer said requesting to remain anonymous.

Higher expenditure in the first two months indicates that the government has front-loaded its expenditure in its fight against the Covid-19 pandemic.

India’s core sector output data has performed better after the lows seen in April. In May, the eight core sector industries contracted by 23.4 percent, against a 37 percent contraction in May. Coal, crude oil, natural gas, refinery, fertiliser, steel, cement and electricity form the core sector industries in the country. The core sector has a weighting of around 40 percent in the index of industrial production. Apart from fertilisers, which saw growth of 7.5 percent in May against negative growth of 4.5 percent in April, all other sectors registered negative growth. 

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