The government will miss its fiscal deficit target for 2019-’20 by 0.5 percentage point, Finance Minister Nirmala Sitharaman said in her Budget speech on Saturday. She pegged the fiscal deficit at 3.8% of the Gross Domestic Product for 2019-’20 and 3.5% for 2020-’21.

A fiscal deficit is a shortfall in the government’s income compared with its expenditure.

In 2018-’19 too, the fiscal deficit had exceeded the government’s estimate. During the Interim Budget in 2019, then-Finance Minister Piyush Goyal pegged the deficit at 3.4% of Gross Domestic Product for 2018-’19, compared to the 3.3% target the government had set in 2018. Goyal said the higher fiscal deficit is due to the “need for income support for farmers”.

The government in its July 2019 Budget again set the target for 2019-’20 at 3.3%. In July, while presenting the full budget, Sitharaman justified the target, claiming that it was realistic. The government said it expects a net additional revenue of Rs 6,000 crore over the estimates made in the Interim Budget in February. Credit rating agency Moody’s had warned earlier that India might miss its fiscal deficit target.

In February 2019, the government had projected a fiscal deficit of 3.4% of the GDP for 2019-’20.

Sitharaman also said in her speech that the government has accepted the recommendations of the interim report of the 15th Finance Commission. The panel has suggested reducing the states’ share in gross tax revenue from 42% to 41%, with the 1% going to the Union Territory of Jammu and Kashmir. It recommended that Rs 90,000 crore be set aside for local bodies. The finance minister said the final report of the panel will be presented to President Ram Nath Kovind later this year.

“On the revenue side as compared to actual of 2018-’19, direct taxes are expected to increase by 17.5%, indirect taxes are going up by only 15%,” Finance Secretary Subhash Chandra Garg had said in July. “This is very realistic target in our judgement. On non-tax side, there is also an increase as we are expecting better dividends.” The finance ministry official said estimated government expenditure would be according to the Interim Budget’s estimates, with a small increase of Rs 2,000 crore.

However, the 15th Finance Commission report said the gross tax revenue will be Rs 22.4 lakh crore, a shortfall of Rs 2.2 lakh crore from the projected figure for 2019-’20.

In October last year, former Reserve Bank of India Governor Raghuram Rajan alleged that India’s fiscal deficit “conceals a lot” and may push the economy into a “worrisome situation”. Rajan said the fiscal deficit was high, which affected the growth of the economy, adding that the actual fiscal deficit may be higher than the collective figure of the Centre and states at 7%. The actual collective fiscal deficit may be higher around 9% to 10%, according to international investment firms, Rajan said.

Sitharaman on Saturday said that India’s nominal Gross Domestic Product growth rate will be around 10% in 2020-’21. Receipts for the next financial year are estimated at Rs 22.46 lakh crore, and expenditure at Rs 30.42 lakh crore, due to the various welfare schemes of the government.