"Deficit targets presented in India's central government budget on February 1 are higher, and medium-term consolidation more gradual, than we expected", Jeremy Zook, director Fitch Ratings' Asia-Pacific Sovereigns team said in a note on Tuesday.
The contribution of lower receipt to this increased fiscal deficit was 16.5 percent and higher expenditure was 83.5 percent and that any improvement in fiscal deficit of FY22 should come mainly from receipts side.
This was funded through government borrowings, multilateral borrowings, among others, she said, adding that the government needed another Rs 80,000 crore for which it would be approaching the market in the next two months.
Net market borrowing is budgeted to slip to Rs 96,771 crore in 2021-22, from Rs 12.74 lakh crore in 2020-21.
India Ratings on Monday said the Budget numbers are more credible and achievable than in the past many years, and the government may even exceed the revenue targets if the current tax buoyancy level is maintained. This year's Budget gives priority to growth and our government has done it earlier and we will do it again.
Announcing the Budgetary proposals for the 2021-22, Sitharaman also proposed a sharp rise in capital expenditure of the government and provided 554,000 crore Indian Rupees (75.8 billion US dollars) which is 34.5 percent more than the Budget Estimate of 2020-21. For FY21, the fiscal deficit was pegged at 3.5% in the Budget announced in February previous year. She also said that the Centre's expenditure increased further once the health crisis was stabilised in order to boost demand.
But, the size of the overall expenditure is capped at Rs 34.83 lakh crore, which is only marginally higher than in 2020-21 at Rs 30.42 lakh crore.
The Fiscal Responsibility and Budget Management Act, enacted in 2003, had set the target for India's fiscal deficit at 3 percent of the gross domestic product (GDP) for March 2021, however, this goal has been deferred.
Along with the structural reform measures, in the Budget 2021-22, the government has focused on its mandate in the preamble to the FRBM Act, of improving fiscal transparency.
The govt now aims to reach below 4.5 percent by FY26 in a steady manner.