Economic Survey 2017-18 on Monday hinted that pause in government’s fiscal consolidation programme can’t be ruled out. Reflecting largely fiscal developments at the center, a pause in general government fiscal consolidation relative to 2016-17 cannot be ruled out, the Economic Survey 2018 stated. “Setting overly ambitious targets for consolidation — especially in a pre-election year — based on optimistic forecasts that carry a high risk of not being realized will not garner credibility,” Chief Economic Adviser Arvind Subramanian said.
The fiscal deficit for the first eight months of 2017-18 reached 112 percent of the total for the year, far above the 89 percent norm (average of last 5 years), largely because of a shortfall in non-tax revenue, reflecting reduced dividends from government agencies and enterprises. Expenditure also progressed at a faster pace, said Economic Survey 2018.
“The central government’s fiscal deficit until November 2017 was Rs. 6.1 lakh crore compared to the budgeted Rs. 5.5 lakh crore. In contrast, state governments seem to be hewing closely to their targeted fiscal consolidation – in part because the center has guaranteed them a large increase in their indirect tax take, as part of the GST agreement. Reflecting largely fiscal developments at the center, a pause in general government fiscal consolidation relative to 2016-17 cannot be ruled out. In addition, the measured deficit for 2017-18 will include Rs. 80,000 crore (0.5 percent of GDP) in capital provided to public sector banks. But this will not affect aggregate demand, as reflected in international accounting practice which deems such operations as financing (“below-the-line) rather than expenditure,” Economic Survey 2018 said.
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Finance Minister Arun Jaitley on Monday tabled the Economic Survey 2017-18 in Parliament just after President Ram Nath Kovind addressed a joint session of both Houses ahead of Budget 2018. Chief Economic Adviser Arvind Subramanian prepared the survey. The Economic Survey 2018 estimates that gross domestic product will have grown 6.75 percent in the current fiscal year ending in March. The Economic Survey 2017-18 sees India’s gross domestic product expanding to about 7-7.5 percent next financial year and warned economic management will be challenging in the coming year due to the overall economic and political background.