Question

Which one of the following statements about Indian economy during 2019-20 is not correct?
1. There has been deceleration in growth rate.
2. There has been sluggish growth in tax revenue relative to the Budget Estimates.
3. Fiscal deficit as percentage of GDP has been as per the Budget Estimates.
4. The non-tax revenue registered a considerably higher growth.

Answer 1

Correct Answer - Option 3 : Fiscal deficit as percentage of GDP has been as per the Budget Estimates.

The correct answer is Fiscal deficit as a percentage of GDP has been as per the Budget Estimates.

The incorrect statement is Fiscal deficit as a percentage of GDP has been as per the Budget Estimates.

• The NK Singh committee (set up in 2016) recommended that the government should target a fiscal deficit of 3% of the GDP in years up to 31^st March 2020, cut it to 2.8% in 2020-21, and to 2.5% by 2023.
• The government describes the fiscal deficit of India as the excess of total disbursements from the Consolidated Fund of India, excluding repayment of the debt, over total receipts into the Fund (excluding the debt receipts) during a financial year.
  • In simple words, it is a shortfall in a government's income compared with its spending.
• The government that has a fiscal deficit is spending beyond its means.
• It is calculated as a percentage of Gross Domestic Product (GDP), or simply as total money spent more than income. Hence option 3 is correct.
• In either case, the income figure includes only taxes and other revenues and excludes money borrowed to make up the shortfall.

• The substantial deceleration in the nominal GDP growth reflects poorly on the government's fiscal marksmanship. In other words, it signifies that the government was not able to assess the magnitude of economic growth deceleration that was underway.
• The poor fiscal marksmanship, in turn, leads to inaccurate policymaking because a government could end up making policies for an economy that does not actually exist on the ground. The fiscal policy 2019-20 was characterized by sluggish growth in Tax revenue relative to the budget estimates.
• The Non-Tax revenue registered considerably higher growth in the first eight months of this financial year compared to the same period last year. The country's fiscal deficit widened to 4.6 percent of the Gross Domestic Product in the year 2019-20 mainly on account of poor revenue realization, according to official data. The deficit, which signifies the gap between government revenue and expenditure, is higher than the revised estimate of 3.8 percent for the fiscal.