Mumbai: The government is likely to stick to the fiscal deficit target of 3.3 per cent of GDP in FY19 and 3.2 per cent of the GDP for FY20 according to an SBI research report. It, however, added that such numbers might be optical as of now as indirect tax collections and even disinvestment receipts are much below target.
“We expect a cut in capital expenditure by Rs 50,000 crore and postponing Rs 30,000 crore of revenue expenditure to the next year,” it said.
As against the budgeted amount of Rs 75,000 crore (revised later to Rs 1 lakh crore), the report noted that the borrowings through small savings has reached Rs 45,396 crore by November 2018. In FY18, the government had completed the scheduled borrowing of Rs 1.02 lakh crore through Small Savings Scheme).
“The large funding through NSSF is possible in part owing to large interest gap between bank deposits and the small saving rates. However, this may make it difficult for banks to reduce deposit rates and hence lending rates in near future,” said Soumya Kanti Ghosh, group chief economic advisor, State Bank of India (SBI).
Interestingly, in the last few months, with bank deposit growth significantly lagging bank credit growth, banks have been increasing deposit rates to protect the possibility of deposit flight from banks. Such widening gap between deposit and credit growth requires banks to manage liquidity by focusing on deposit growth. “It is imperative that we make bank deposits attractive by making it tax free,” he added.