Budget 2019: Govt prepares road map to reduce fiscal deficit to 3% in 2021-21, eliminate primary deficit

  • Government aims to contain the fiscal deficit at 3.4 percent in the current as well as next fiscal

  • Fiscal deficit in 2019-20 is budgeted to be 3.4 percent of GDP

  • In Budget estimate 2018-19, primary deficit was calculated at Rs 48,481 crore

New Delhi: The government Friday came out with a road map to reduce the fiscal deficit, the gap between total expenditure and revenue, to 3 percent of the GDP by 2020-21, and eliminate primary deficit.

As per the medium term fiscal policy cum fiscal policy strategy statement tabled in Parliament, the government is aiming to contain the fiscal deficit at 3.4 percent in the current as well as next fiscal, and then bring it down to 3 percent in 2020-21.

Presenting the Union Budget, Finance Minister Piyush Goyal said that the government would have maintained fiscal deficit at 3.3 percent for year 2018-19 and taken further steps to consolidate fiscal deficit in year 2019-20.

 Budget 2019: Govt prepares road map to reduce fiscal deficit to 3% in 2021-21, eliminate primary deficit

Representational image. Reuters.

"However, considering the need for income support to farmers we have provided Rs 20,000 crore in 2018-19 RE (revised estimates) and Rs 75,000 crore in 2019-20 BE (budget estimates).

"If we exclude this, the fiscal deficit would have been less than 3.3 percent for 2018-19 and less than 3.1 percent for year 2019-20," he said in the Lok Sabha.

The government further said the gross tax revenue as a percent of GDP is expected to increase to 12.1 percent of GDP in 2019-20 and stabilise at that level in 2020-21 before climbing up to a level of 12.2 percent of GDP.

Fiscal deficit in 2019-20 is budgeted to be 3.4 percent of GDP and is projected to adhere to the Fiscal Responsibility and Budget Management (FRBM) Act's targeted value of 3 percent in 2020-21 and continuing at that level, it added.

Primary deficit is another indicator which has been included in the medium-term fiscal policy statement from 2019-20.

Primary deficit refers to the deficit left after subtracting interest payments from fiscal deficit.

In Budget estimate 2018-19, primary deficit was calculated at Rs 48,481 crore which is 0.3 percent of GDP. Primary deficit in RE 2018-19 is expected to be Rs 46,828 crore which works out to be 0.2 percent of the GDP.

The document projects nil primary deficit for 2020-21 and 2021-22 financial years.

The reduction of primary deficit is a positive sign as it shows reduced usage of borrowed funds to pay for existing liabilities, the document said.

It also said there has been a slight decrease in gross tax revenue estimates for 2018-19 to the tune of about Rs 23,067 crore mainly on account of lesser than anticipated collection of GST.

The government further said the gross tax revenue as a per cent of GDP is expected to increase to 12.1 percent of GDP in 2019-20 and stabilise at that level in 2020-21 before climbing up to a level of 12.2 percent of GDP.

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Updated Date: Feb 01, 2019 19:09:19 IST