The government may go back on its pledge to follow a glide path for fiscal deficit that envisages the deficit at 3 per cent of GDP in the next fiscal as it looks to boost expenditure and revive growth, which had limped to a 26-quarter low in the second quarter.

Economic affairs secretary Atanu Chakraborty, who has the additional charge of expenditure, had recently said the government was following a glide path that gradually eases the fiscal deficit every year from 3.4 per cent of GDP in 2017-18 to 3.3 per cent this fiscal to 3 per cent in 2020-21. The numbers are set on the basis of the principles of the Fiscal Responsibility and Budget Management (FRBM) rules.

However, the slowdown in the economy and the lower-than-expected revenue collection could see the government relaxing the target in the next budget.

Finance ministry officials said there was little chance of tax collections rising significantly, given the fact that the government had already slashed the corporate tax rate.

“Under these circumstances, it may become an imperative to temporarily pause the glide path envisaged by the FRBM Act,” the officials said.

The Telegraph

They said the budget was likely to make a considerably higher allocation towards capital spending as part of the government’s ambitious plan to spend Rs 100 lakh crore on infrastructure projects over the next five years, necessitating a higher deficit. The government is likely to identify financially viable infrastructure

projects that could be initiated immediately as well as those that could be included in the pipeline over five years ending March 2025.

Although the fiscal deficit target for 2020-21 has not been finalised, the officials said the government may push the deadline to reach the 3-per-cent target by another two years.

The government had revised downwards the fiscal deficit target to 3.3 percent for 2019-20 in the budget compared with 3.4 per cent set in the interim budget.

However, the fiscal deficit for the current fiscal is likely to overshoot the target and may go up to 3.5 per cent to 3.6 per cent of GDP.

Industry chamber CII has suggested the government fix a range for deficit: a core target plus an upper limit of 50-75 basis points to meet specific expenditures.