Finance Minister Piyush Goyal on Friday pegged the fiscal deficit for 2019-’20 at 3.4% of the Gross Domestic Product. This is slightly higher than the target of 3.3% of GDP that the government had set itself last year.
Goyal said the higher fiscal deficit is due to the “need for income support for farmers”.
The fiscal deficit for the current year has been revised upward to 3.4% from the previous target of 3.3%. “From the high of almost 6% seven years ago, the fiscal deficit has been brought down to 3.4% in 2018-’19 RE,” Goyal said in his Budget speech.
Goyal said the government would have maintained the current fiscal deficit at 3.3%. “However, we have provided Rs 20,000 crore in 2018-’19 RE [revised estimate] and Rs 75,000 crore in 2019-’20 BE [budget estimate],” Goyal said. “If we exclude this, the fiscal deficit would have been less than 3.3% for 2018-’19 and less than 3.1% for year 2019-’20.”
Fiscal deficit represents how much more the government spends than it earns.
Goyal said the government managed to contain the fiscal deficit despite the Finance Commission recommending an increase in the share of the states from 32% to 42% in central taxes. Goyal said the recommendation was accepted in the “true spirit of cooperative federalism” and transferred “significantly higher amounts to the states”.
In the Budget document, the government has said it is aiming at a fiscal deficit target of 3% in 2020-’21 and 2021-’22.