Economic Survey: 4.1% fiscal deficit a 'daunting task', but will achieve it

The government is committed to fiscal consolidation and will stick to the 4.1 percent fiscal deficit target set in the raodmap last financial year, though it is a “daunting task”, reiterated the Economic Survey 2014-15 presented in Parliament today.

However, it indicated that the government may have to cut its expenditure in order to meet the target, if revenue did not pick-up sufficiently. It said the moderate indirect tax collection and a large subsidy bill make the 4.1 percent deficit a daunting task, despite the elbow room from the decline in oil subsidies.

The Economic Survey mentions that going forward, enhanced revenue generation is a priority for which implementation of a well-designed goods and services tax (GST) and other tax reforms is crucial role.

The fiscal consolidation plan as enunciated in Budget Estimates (BE) for 2014-15 entailed an increase in the tax to GDP ratio and non-debt receipts to GDP ratio to 10.6 per cent and 9.8 per cent respectively, and a continuance of the low level of total expenditure to GDP ratio at 13.9 per cent. The envisaged growth for Gross Tax Revenue (GTR) was 17.7 per cent over RE 2013-14 and 19.8 per cent over the Provisional Account (PA) 2013-14.

The survey also admitted that the Budget estimate of 13.4 percent GDP growth rate and 19.8 percent overall gross tax revenue growth for 2014-15 is an overestimation.

The increase in gross tax revenue has been just 7 percent in over the year earlier, while non-tax revenue during the period registered an increase of 27.3 percent , the survey said.

On the expenditure side, there has been a shortfall in growth in plan and non-plan expenditure during the April-December 2014. Indirect taxes growth at 6.2 percent in 2014-15 (April-December) is much lower than 25.8 percent over the corresponding period of 2013-14.

“Direct taxes collected in the first 9 months in the year are broadly in the same level as in the corresponding period of the last year. 6.2% growth at expenditure in April – December 2014 over the corresponding period in the previous year has helped in containing fiscal deficit for the first three quarters of the current fiscal,” the survey said.