Goodbye to fiscal consolidation

Take aways of the articles:

  • The fiscal deficit target for 2017-18 had been set at 3.2% of GDP for 2017-18 and 3.0% for 2018-19. The Budget for 2018-19 puts paid to these objectives for now. The fiscal deficit for 2017-18 has ended up at 3.5%. For 2018-19, the government has set a target of 3.3%. The fiscal deficit target of 3% of GDP has now been pushed to 2020-21.
  • Revenue receipts in 2017-18 have grown faster than anticipated (although non-tax revenues have fallen short of target). 
  • Tax revenues were higher than anticipated (15% compared to 13%).
  • Capital receipts are expected to exceed the budgetary estimate thanks to record disinvestment revenues.
  • It is the expenditure side that has given way. Revenue expenditure grew by 15% compared to the Budget estimate of 6%. An increase in establishment expenditure accounts for more than 40% of the increase in revenue expenditure. Capital expenditure ended up lower than in the previous year by 3.9%. In the Budget for 2017-18, capital expenditure had been set 10.7% higher. This was flagged as one of the great accomplishments of last year’s Budget and it was expected to boost GDP growth.
  • The revenue deficit for 2017-18 is 2.6% of GDP, way above the Budget estimate of 1.9% of GDP.
  • However, the Budget has tried to reach out to the rural constituency and to the poor through a number of measures. The most notable, perhaps, is the promise of a minimum support price (MSP) for all crops of 50% above the cost of production.
  • The Budget proposes a health insurance scheme that will cover 10 crore poor families with an insurance cover of ₹5 lakh each. Since such a cover would mean an annual premium of at least ₹10,000, it is doubtful that it is backed by actual outlays in the Budget. 
  • The Budget also includes several measures for micro, small and medium enterprises (MSMEs). There is a target of ₹3 lakh crore for lending under the MUDRA scheme.


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