Medium-term forecast: Centre’s budget capex to stagnate at 1.6% of GDP

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New Delhi | Published: August 8, 2018 2:06:19 AM

Despite the Centre’s tax-GDP ratio seen rising to 12.1% in FY19 from 11.4% in FY18 and relief on interest payment front, its capital expenditure is projected to stagnate at 1.6% of GDP in the medium term.

centre budget capex, GDP ratio, MTFF, Gross tax to GDP, Revenue expenditureRevenue expenditure will rise from 11.2% of GDP in FY18 to 11.44% of GDP in FY19 before moderating to 10.86% in FY21.

Despite the Centre’s tax-GDP ratio seen rising to 12.1% in FY19 from 11.4% in FY18 and relief on interest payment front, its capital expenditure is projected to stagnate at 1.6% of GDP in the medium term. Capex to GDP had touched 1.86% in FY17. In absolute terms, the Centre’s capital expenditure is seen rising 8.9% y-o-y to Rs 3.3 lakh crore in FY20 and 15% in FY21 to Rs 3.76 lakh crore, according to the medium-term expenditure framework (MTEF) tabled in Parliament on Tuesday.

Revenue expenditure will rise from 11.2% of GDP in FY18 to 11.44% of GDP in FY19 before moderating to 10.86% in FY21. The centre’s civilian salary cost is estimated to rise from Rs 1.5 lakh crore in FY18 to Rs 1.75 lakh crore by FY21. While the fertiliser and fuel subsidies would be contained around the current levels, food subsidy could rise to Rs 1.88 lakh crore in FY20 and Rs 2.1 lakh crore in FY21 from Rs 1.69 lakh crore in the current fiscal owing to the implementation of the new minimum support price (MSP), which promises to give farmers 50% more than the cost of production.

As per the MTFF, nominal GDP, which is budgeted to grow 11.6% in FY19, could expand 11.8% in FY20 and 12.3% in FY21. According to the MTEF, the tax receipts are expected to be buoyant in the medium-term. This buoyancy is anticipated partly because of the better tax administration and the attempts to increase the individuals covered under the tax net. Gross tax to GDP is estimated to be around 12.1% of GDP in the three years upto FY21.

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