Union finance minister Arun Jaitley sought to justify the fiscal deficit target miss with the shortfall of goods and services tax (GST) and other factors, including lower surplus transferred by the Reserve Bank of India (RBI) and telecom sector.
Jaitley said in 2017- 18 the central government will be “receiving GST revenues only for 11 months” instead of 12 months. “This will have a fiscal effect,” he said in the post-Budget press conference on Thursday.
The finance minister, in the Budget, projected a higher fiscal deficit of 3.5% of GDP for 2017-18, as against the target of 3.2%. The fiscal deficit is the amount of excess spending over revenue. The government has raised spending by 10% (to Rs 24.42 lakh crore) in this Budget, and postponed the deficit target.
Revenue secretary Hasmukh Adhia, said, “GST revenue collection will fall short by Rs 50,000 crore.”
S D Mazumdar, former chairman of Central Board of Direct Tax, an apex body of earlier indirect tax, said, “The financial year continues to be of 12 months (April-March), while the Budget presentation has been advanced by a month. So, the contribution of GST in total indirect tax collection in this financial year will be for nine months (July-March), and that of Central Excise and Service Tax (pre- GST) for three months (April- June)”.
There have been too many revisions too frequently, in the past seven months.
“I expect GST revenue buoyancy in next year, provided it attains certainty and stability. Besides, GSTN (the IT backbone) must be fully operational without glitches,” he said.
As per the Budget document, total revised estimates for expenditure in 2017-18 are Rs 21.57 lakh crore (net of GST compensation transfers to the states) as against the Budget Estimates (BE) of Rs 21.47 lakh crore. The government has revised the estimated net borrowing in Budget for the current fiscal from Rs 3.5 lakh crore to Rs 4.79 lakh crore.
Jaitley said he would accept key recommendations of the Fiscal Reform and Budget Management Committee. The recommendations are related to the adoption of the debt rule and to bring down the central government’s debt-to-GDP ratio to 40%. “The government has also accepted the recommendation to use fiscal deficit target as the key operational parameter,” the minister said.
Direct tax buoyancy used in the fiscal 2019 Budget is 1.25, lower than 1.74 in fiscal 2018. But indirect tax buoyancy Union used in fiscal 2019 is 1.66 higher than 0.82 in fiscal 2018.
Sunil Kumar Sinha, principal economist at India Ratings, said, “This is plausible because GST collections in fiscal 2019 will be for 12 months as against 11 months in fiscal 2019 (three months of excise, customs, etc and eight months of GST). Disinvestment target of Rs 80,000 crore appears achievable, provided the capital markets remain buoyant.”
Although the revenue growth assumed in the Budget at 14.63% looks likely, the expenditure growth at 10.12% seems to be an underestimate. This may make the fiscal deficit target of 3.3% feasible.
However, in case of any deviation from the budgeted estimates, analysts believe the government like in the past can cut the capital expenditure to achieve the fiscal deficit target.