Fiscal, Revenue, Primary deficit declining in last 3 yrs: Survey

Speed Post News Network

New Delhi : Union Minister Finance and Corporate Affairs Minister Arun Jaitley tabled the Economic Survey 2017-18 in Parliament on January 29, 2018. Based on the firm footing provided by the discernible improvements in most fiscal indicators such as revenue buoyancy, expenditure quality, tax devolution and deficits, the Government, in partnership with the States, ushered in the long-awaited GST era from July,2017.

The GST was unveiled after comprehensive preparations, calculations and multi-stage consultations, yet the sheer magnitude of change meant that it needed to be carefully managed. The Government is navigating the change and challenges including the possibility that a substantial portion of the last-month GST collections may spill over to the next year, the Survey says.

The data on Central Government finances available till November 2017 from the Controller General of Accounts (CGA) suggests that during the first eight months of the current year 2017-18, the Gross Tax Collections are reasonably on track and the robust progress in disinvestment compensates to a great extent for the sluggish pace in non-tax revenue. The growth in direct tax collections of the Centre has kept pace with the previous year and is expected to meet targets with a growth of 13.7 % while indirect taxes grew by 18.3 % during April-November 2017, according to a PIB release.

The eventual outcome in indirect taxes during this year will depend on the final settlement of GST accounts between the Centre and the States and the likelihood that only taxes for eleven months (excluding IGST on imports) will be realized. The States’ share in taxes grew by 25.2 % during April-November 2017, much higher than the growth in net tax revenue (to Centre) at 12.6 % and of gross tax revenue at 16.5 %.

As an information repository, the Goods and Services Tax (GST) provides a radical change and a new insight into the understanding of the Indian economy. Preliminary analysis of this information says there has been a fifty percent increase in the number of indirect taxpayers and a large increase in voluntary registrations, especially by small enterprises that buy from large enterprises and want to avail themselves the input tax credits. The distribution of the GST base among the states is closely linked to the size of their economies allaying fears of major producing states that the shift to the new system would undermine their tax collections.

Data on the international exports of states (the first in India’s history) suggests a strong correlation between export performance and states’ standard of living. India’s exports are unusual in that the largest firms account for a much smaller share of exports than in other comparable countries. India’s internal trade is about 60 % of GDP, even greater than estimated in last year’s Survey and comparing very favorably with other large countries.

The advancing of the budget cycle and processes by almost a month gave considerable leeway to the spending agencies to plan in advance and start implementation early in the financial year leading to a robust pace of progress of Central expenditure. Sound Public financial management has been one of the pillars of India’s macro  economic stability in the last three years. In accordance with this, the Fiscal Deficit, Revenue Deficit as well as the Primary Deficit has been declining for  the past 3 years, according to the PIB release.

The early pick-up in expenditure coupled with front-loading of some expenditure and increased interest outgo exerted pressure on fiscal deficit which expanded to 112% of budget estimates by November 2017. A good part of this growth is likely to normalize as the year progresses. If indications and patterns till November are to hold, then the States taken together may be able to meet  their targeted level of fiscal deficit in 2017-18.