Deficit target overshot 15%

India’s divestment efforts, with year-to-date collections, still at a fifth of the target of Rs.800 billion, according to a report by a Singapore banking group, DBS.

The bank said it was an equally big concern as it is with India’s fiscal deficit target for FY2019.

To jumpstart the process, plans are to offload minority stake sales, conduct share buybacks and Exchange Traded Funds (ETFs) by end-year, alongside a possible merger of power sector financing firms, expects DBS in its economic report on 10 Jan 2019.

DBS pointed out that India’s fiscal deficit target has been overshot by 15% in the first eight months of FY2019, largely due to a revenue shortfall rather than front-loading of expenditure.

“Lower than budgeted indirect tax revenues and weak divestment proceeds are a source of worry,” wrote Radhika Rao, economist at DBS Group Research, in the commentary.

Net direct tax collections have reached the half way mark, with four months left this FY.

These revenues typically improve towards the end of the year due to end-fiscal flows. Markets are less optimistic of a similar boost in indirect collections, said Rao in the commentary.

The current run-rate of the centre’s GST revenues is tracking a shortfall of Rs.700-800bn vs the annual budget.

A late push for additional dividends from state-owned entities and the RBI is also likely, with speculation that the central bank might transfer Rs.300-400bn (~0.2% of GDP) to the state’s coffers, which will be in addition to the Rs.400bn assured in August 2018.

“Despite the downbeat year-to-date math, we think that a sizeable slippage in the fiscal deficit target is unlikely,” said Rao. fiinews.com