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Fiscal deficit to be higher than anticipated: Former Finance secy Subhash Chandra Garg

NEW DELHI: Two weeks ahead of the presentation of Union Budget FY2020-21, former finance secretary Subhash Chandra Garg warned that fiscal deficit will be to the tune of 3.7-4 per cent of the GDP, overshooting the target.

Garg, who had been finance secretary when the Budget FY2019-20 was presented, wrote in a blog posted on January 14 that the “real” fiscal deficit would be even higher at close to 4.5-5 per cent of the GDP (Gross Domestic Product).

Analysing the three years’ accounts of the government, he also said that the revenue shortfall will be steeper than anticipated.

“Government had pegged tax revenue growth at 25.26 per cent. In actual, tax performance has been quite poor because of weak nominal growth, slow growth in personal income taxes and the government’s decision to reduce corporate tax rates. GST revenues are also not very robust. There is substantial shortfall visible in excise duties and customs duties, which had a very high asking rate this year,” Garg wrote.

According to him, the transfers from RBI will help only non-tax revenue and revenue deficit will be to the tune of Rs 2-2.5 lakh crore. He also predicted that the government is likely to continue off-budget financing this year, including loan from the National Small Savings Fund to Food Corporation of India.

“LIC had investment corpus of Rs 28.75 lakh crore in the policyholders’ account as on June 30, 2019. As much as 18.84 lakh crore (more than 65 per cent) of this corpus was invested in ‘government securities and government-guaranteed bonds including Treasury Bills’. The government runs a large number of small savings schemes, which also nudge household savings towards government debt. It exceeds Rs 15 lakh crore,” the blog pointed out.

Once the government’s blue-eyed boy, Garg had had his fair share of controversies. He was said to have brought the tiff between the Finance Ministry and the RBI out in the open; his north block subordinates also attribute the quitting of former RBI chief Urjit Patel and deputy director, Viral Acharya, to Garg.

But his fortunes changed after Nirmala Sitharaman took charge as the Finance Minister. Following his shock transfer to the power ministry two weeks after the presentation of the Budget FY20, Garg took voluntary retirement from the government service.

According to Garg, the real fiscal deficit in FY2019-20, including off-budget financing such as recapitalisation of banks, loan to the Food Corporation and government-serviced bonds, are likely to be in the range of 4.5-5 per cent of the GDP.