In a significant admission of fiscal slippage with implications for pushing inflation, the government on Thursday revised upwards its fiscal deficit target for 2017-18 to 3.5 per cent of the GDP, or the equivalent of Rs 5.9 lakh crore.
The announcement of a higher target, in place of the 3.2 per cent for the current fiscal announced earlier, was made by Finance Minister Arun Jaitley while presenting the Budget 2018-19 in the Lok Sabha. This is the last full budget of the NDA government before the general elections expected to be held in the first half of 2019.
"The revised estimate of fiscal deficit for 2017-18 is at Rs 5.9 lakh crore, or at 3.5 per cent (of GDP)," Jaitley said, explaining that a main cause of the fiscal slippage was that indirect tax revenues after the introduction of the Goods and Services Tax were only available for 11 months of the current fiscal.
"There has been a shortfall also in non tax revenue, part of which has been made up by higher direct tax collections and higher disinvestment income this year," he said.
The Finance Minister placed the revised extimate of government expenditure for the fiscal at Rs 21.57 lakh crore against the earlier budget estimate of Rs 21.47 lakh crore.
The Finance Ministry's Economic Survey 2017-18 authored by Chief Economic Advisor (CEA) Arvind Subramanian released on Monday had said that ambitious targets of fiscal consolidation for the coming pre-election year be avoided, hinting thereby that the target of 3.2 per cent of the GDP could be exceeded.
"Reflecting largely fiscal developments at the Centre, a pause in general government fiscal consolidation relative to 2016-17 cannot be ruled out," said the Survey.