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Govt Intends To Cut Spending By ₹2 Lakh Crore To Control Deficit

Lack of demand and dull corporate earning growth in the economy led to a slow in the tax collections, which has ultimately resulted in the revenue shortfall of about ₹2.5 lakh crore.

As per the government sources, India’s government is expected to cut spending for the current fiscal year by as much as ₹2 lakh crore as it confronts one of the biggest tax deficits in recent years.

India, the third-largest economy is currently growing at its slowest pace in over six years due to of lack of private investment, could further suffer if the government cuts spending.

Considering the current situation, the government have no or minimal choice, forcing them to take such steps.

As per the government data, by November the government had spent 65 per cent of the total expenditure target of ₹27.86 lakh crore. However, reduced the pace of spending in October and November. By cutting down the expense up to ₹2 lakh crore, the government is aiming to reduce the expenditure by 7 per cent for the year.

In October and November, government spending rose by ₹1.6 lakh crore, nearly half the 3.1 lakh crore it spent in September. The fiscal year starts April 1 and ends March 31.

As the private investment as slow down, this will lag the growth of the economy further. India’s economic growth had stalled for six consecutive quarters to 4.5 per cent in July-September, despite taking measures like a 135-basis-point cut in interest rates by the central bank from February 2019.

Even the Reserve Bank of India now seems to be worried about the current rising inflation trend. From December 5, it kept its key lending rate on hold, even though it slashed its growth forecast for the current fiscal to 5 per cent, which would be the lowest in a decade.

To everyone’s surprise even the corporate tax rate cut declared by Finance Minister Nirmala Sitharaman earlier this financial year failed to encourage private investment in the economy.

As per the reports, the government is expected to keep the fiscal deficit under 3.8 per cent of gross domestic product, while letting it slip from its earlier set target of 3.3 per cent for the year.

The government is anticipated to declare additional financing of ₹30,000 crore to ₹50,000 crores for the current year to match the revised fiscal deficit, two sources in the government said.

It seems that with the current economic condition and deficit, the BJP government led by Modi will have a tough time in reviving.

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