Govt unlikely to substantially loosen fiscal deficit target: CLSA

The government is unlikely to substantially loosen the fiscal deficit target for the current financial year even though a weakening economy has raised expectations of a fiscal boost, said foreign brokerage CLSA.The Union Budget for FY20 will be presented by Finance Minister Nirmala Sitharaman on Friday.Revenue targets will also need to be revised downwards by 8-10 per cent in the upcoming Budget along with appropriate cut in FY20 expenditure targets after a 8.6 per cent revenue shortfall in the 2018-19 financial year, according to CLSA.“Any large fiscal support appears unlikely,” said CLSA.The government had set a fiscal deficit target of 3.4 per cent for FY20 in the interim Budget in February. 69972904 The government's fiscal deficit touched 52 per cent of the budget estimate for the full year in the first two months of the financial year 2019-20. In February’s interim budget, the government had estimated the fiscal deficit at Rs 7.03 lakh crore for 2019-20.The interim Budget has an improbable tax revenue growth of 23 per cent and expenditure growth of 20 per cent baked in, and this will see a curtailment in the Budget, said CLSA.The brokerage expects the government to budget 13 per cent tax collection growth and 15 per cent expenditure growth, which will keep the fiscal deficit target at 3.5 per cent.Watch | Kenneth Andrade's Budget Wishlist 70038499 CLSA also expects compliance, disinvestment and off balance sheet pressures to stay high.Weak GST collections have been a key issue for government finances. The Centre has resorted to large disinvestments and off-balance sheet spending because of this. CLSA believes that the trend is unlikely to change as the government is unlikely to relent much on the headline fiscal deficit target. The brokerage is betting on sops for the housing sector to trigger a capex cycle recovery and drive job creation. Measures such as higher tax deduction limits, improved financing access to developers and incentives for rental housing can help, said CLSA. 70037368

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