As GST collections slipped to Rs 80,808 crore in November, down from an average of Rs 90,000 crore in the previous months and with government planning to borrow additional Rs 50,000 crore via gilts, which is double the amount that was estimated by the market, the GDP growth for the financial year 2017-2018, may range between just 6%-6.5%. Noted economist Shankar Acharya told ET Now that since the GST shock is still continuing, the economic growth will be around 6%-6.5% in FY18, not above that.
Recently, rating agency Fitch has cut India’s GDP growth forecast for the current fiscal to 6.7% from 6.9% and fiscal year 2018-2019 to 7.3% from 7.4%, saying the that the economic growth has “repeatedly disappointed in recent quarters”.
In the second quarter (July-September), India made a comeback at 6.3% from a three-year low 5.7% in the previous quarter. However, massive rationalisation on as many as 178 products in November led to the fall in government’s revenue. The fiscal deficit at the end of November breached the target and touched 112% of the budget estimate for 2017-18 mainly due to lower GST collections and higher expenditure.
Aditi Nayar, an economist at ICRA, the Indian arm of rating agency Moody’s, said the additional borrowing could lead to “modest fiscal slippage” as the government was likely to miss its revenue receipts target. The government had borrowed Rs 3.72 lakh crore in the first half of the fiscal year 2017-18 and had pegged Rs 2.08 lakh crore for the second half.
It was also reported that the government has estimated a tax revenue shortfall of Rs 55,000 crore for the fiscal year 2017-2018 and may consider breaching the fiscal deficit target by 20 basis points. For the current fiscal, the government has estimated a direct tax revenue shortfall Rs 20,000 crore and an indirect tax revenue shortfall Rs 25,000 crore- 35,000 crore.
The government has fixed fiscal deficit target to 3.2% of the GDP in the current fiscal as against 3.5% in 2016-17. In absolute terms, 3.2% deficit for the current fiscal works out to nearly Rs 5.47 crore.