On Wednesday, the Finance Ministry announced that it will borrow Rs 50,000 crore through government securities, which analysts said could raise the fiscal deficit by 30 basis points to 3.5% of GDP for 2017-18.
The government breached the fiscal deficit target for the current fiscal year ending March as data showed on Friday the deficit was 112% of the 2017-18 Budget estimate at the end of November, posing a challenge for policymakers grappling to stick to fiscal discipline.
Union finance minister Arun Jaitley may have to recalibrate his fiscal consolidation roadmap of achieving a fiscal deficit of 3% of GDP by 2018-19.
"While we did not expect any breach in the FY2017-18 fiscal deficit target, we will wait for clarity about whether this additional borrowing will make up for revenue shortfalls or fund relaxation of the 3.2 per cent of GDP FY18 fiscal deficit target", the report noted.
The total receipts - from revenue and non-debt capital - during the fiscal's first eight months were Rs 8.66 lakh crore, or 54.2 per cent of the estimates for the current year.
Abheek Barua, chief economist, HDFC Bank, said, "However, with general elections due in 2019 (which often propagates for populist measures) and amidst an ongoing economic recovery (from GST and demonetisation lows), it seems unlikely that the government would like to withdraw its support and opt for aggressive fiscal consolidation next year". The government had signalled a fiscal slippage when it unveiled an additional market borrowing of Rs 50,000 crore for the current financial year on Wednesday.
Total Expenditure incurred by government during the period stood at ₹14.78 lakh crore, out of which ₹12.94 lakh crore is on Revenue Account and ₹1.84 lakh crore is on Capital Account.
With barely three months left for the financial year to end, it's doubtful if the government will be able to get its fiscal math right. Dated securities have maturity of over five years.
During the April-November period, revenue deficit also stood at 152% of the Rs3.2 trillion full-year target signalling that the government may also miss the revenue deficit target of 1.9% of GDP for 2017-18. For FY18, the Centre aims to bring down the fiscal deficit to 3.2 per cent of GDP. The receipts, comprising taxes and other items, were at 57.8 per cent of the target in the year-ago period. While the government has front-loaded expenditure this year as the Budget passage and clearance was advanced, what has added to the worries is a mild dip in revenue. That compares with 66.1 per cent a year ago.
Since revenue collections from the Goods and Services Tax (GST) are slightly lower than the expected in the last two months, the additional borrowing would help bridge the shortfall.