India fiscal deficit woes: IMF calls for 'greater efforts' to reduce it

New Delhi/ Washington, Feb 6: Amid reports that the Union Government may find it difficult to meet the fiscal deficit target of 3.4 per cent in 2019-20, the International Monetary Fund (IMF) on Tuesday called for "greater efforts" to reduce the fiscal deficit.

The Moody's Investors Service had on February 3 said that the government will find it difficult to meet the fiscal deficit target of 3.4 per cent in 2019-20 on account on higher spending and low revenue growth.

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The government has reportedly pegged the fiscal deficit for the next financial year at 3.4 per cent of GDP, as against the original target of 3.1 per cent.

IMF said that greater efforts will be needed to reduce the fiscal deficit as the interim budget envisages a slower pace of fiscal consolidation than previously planned.

"The interim budget envisages a slower pace of fiscal consolidation than previously planned, delaying the time to reach the medium-term central-government debt target of 40 percent of GDP," Ranil Salgado, IMF mission chief for India told PTI.

"To ensure that the debt target is met by 2025, greater efforts will be needed to reduce the fiscal deficit. In that regard, further steps to increase GST compliance will be critical to reach budgeted revenue goals," Salgado said in response to a question.

The New York Times in a news report after the presentation of the interim budget said that it was packed with handouts.

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What is Fiscal Deficit?

The difference between total revenue and total expenditure of the government is termed as fiscal deficit. It is an indication of the total borrowings needed by the government. Through Fiscal deficit, the government can determine the amount that needs to be borrowed in case it lacks adequate resources. Generally fiscal deficit takes place either due to revenue deficit or a major hike in capital expenditure.

OneIndia News with PTI inputs