The government has breached fiscal deficit target of 3.2 per cent of GDP for 2018-19, Finance Minister Arun Jaitley confirmed in his budget speech today. The FM projected a fiscal deficit of 3.3 per cent of the gross domestic product for 2018-19.
"Fiscal deficit numbers were on expected lines. We were expecting a slippage because of shortfall in revenue due to GST. The next year's numbers look realistic.With GST stabilising and GDP expected to increase, government should be able to meet its target", said Sunil Kumar Sinha, Principal Economist, India Ratings.
Jaitley said the government will accept the recommendations made by the Fiscal Reform and Budget Management Committee, to bring down its debt-to-GDP ratio to 40 per cent from the current from 49.4 per cent. This is to “impart unquestionable credibility to the government’s commitment for the revised fiscal glide path,” he said.
In his budget speech, the FM mentioned that fiscal slippage happened because the government will receive goods and services tax (GST) revenue for 11 months in 2017-18 and face shortfall in non-tax revenue due to lower accrual through spectrum auction.
Part of the shortfall was met through higher direct tax collections and disinvestment, Jaitley said. The government hopes to breach the disinvestment target in 2017-18 by collecting Rs 1 trillion against the budget estimate of Rs 72,500 crore. For 2018-19, the government has set a disinvestment target of Rs 80,000 crore, including gains from privatisation of Air India Ltd.
Chief Economic Advisor Arvind Subramanian in the Economic Survey had said that ambitious targets of fiscal consolidation for the coming pre-election year be avoided, hinting thereby that the target of 3.2 per cent of the GDP could be exceeded.
