Containing fiscal gap at 3.9% an uphill task: Deutsche Bank
07/07/2015 14:05

German banking and financial major Deutsche Bank reckons that keeping the fiscal shortfall target at 3.9 per cent of FY 2015-16 Gross Domestic Product (GDP) may be a challenging task for the Narendra Modi led government as a lack of a meaningful pickup in corporate sentiment may affect direct tax mop up while revenue from indirect taxes may miss targets.

“Given the way the economy is shaping up, we think that keeping the fiscal deficit in line with the budget target of 3.9 per cent of GDP this fiscal year could face a number of challenges,” the German lender said.

In FY 2014-15, the government undershot its fiscal deficit target of 4.1 per cent, managing to hold it at 4 per cent.

Deutsche Bank’s pessimistic outlook for the country’s government finances comes after data showed that a mere 37.5 per cent of the budget target was utilized in April-May, compared to 48 per cent in the same period a year ago.

The German banking giant warned that the government’s 3.9 per cent fiscal deficit target for the ongoing fiscal year which ends on March 31, 2016 faces plenty of roadblocks including a two percentage point downside risk to the 12.5 per cent growth projection in nominal GDP, slowdown in the pace of direct tax collection while Rs 69,500 crore target for disinvestment looks a tad ambitious considering the volatile market conditions.