The government will have to borrow money to combine the two ends

Mumbai, Ta. September 20, 2019, Friday

A few more steps announced today as part of the reform measures launched by Finance Minister Nirmala Sitaram for the last one month to boost the country's economy will hit the country's treasury by Rs 1.5 lakh crore annually. In addition, the state treasury is expected to hit Rs. Thus, the total deficit is estimated to be Rs 1.5 lakh crore.

It is not yet clear how this amount will be compensated, but due to these measures, the possibility of increasing fiscal pressure in the coming days is not ruled out.

The adverse effects of the ongoing economic downturn around the world, including India, are being reflected in the country's income tax. The current fiscal year recovery of Goods and Services Tax (GST) has not been as expected and the revenue growth through direct taxes has been poor.

In the first six months of the current financial year, advance tax collections have been high at 5%, compared to 5% in the same period last year. If the current fiscal year's target for direct tax collection is to achieve the target, then the recovery will have to be increased by 5% in the remaining six months. The August GST figures were below Rs 1 lakh crore.

Given the pressure on the government treasury due to a series of concessions, the government will have to take measures to increase revenue to curb its fiscal deficit, said one analyst. For this, the government will have to borrow money from the market at the end of the current fiscal year. In addition, the government has also announced to raise Rs 5 crore in nationalized banks. Keeping in view the recent Rs 1.8 lakh crore receipt from the Reserve Bank, the government will have to look at how it handles fiscal pressure. Providing concessions, it is expected that the economy will increase in demand and thereby increase the revenue through government tax. The analyst added that the government will have to see how much this expectation fades during the coming festivals.

Although the Reserve Bank of India has reduced the repo rate by 5 basis points since February this year, there is no expected increase in industrial investment in the country. In view of this fact, the government has been forced to make a decision to reduce corporate tax from 5% to 5%.