Finance Ministry confident of meeting 3.2% fiscal deficit target

The Finance Ministry is not worried about its deficit goalposts for 2017-18 despite the low dividends from the Reserve Bank of India and muted proceeds from stake sales in public sector enterprises till now.

The Centre has targeted a fiscal deficit of 3.2 per cent of the gross domestic product in 2017-18 and is confident that robust tax revenue and higher receipts from disinvestment in the latter half of the year will come in handy.

“The deficit is not a matter of concern as it is still early days. We are hopeful that it will be met though the financial position may not seem very comfortable at present,” said a senior government official.

A more thorough assessment will be taken next month, when the Finance Ministry and the Reserve Bank of India meet to finalise the government borrowing calendar for the second half of the fiscal.

With the advancement of the Budget, the Centre has managed to frontload its expenditure and start spending from April. This has also meant that its fiscal deficit rose to ₹4,41,685 crore or 80.8 per cent of the full year target by June 30.

Concerns had also emerged after the RBI paid just ₹30,659 crore to the government as dividend for 2016-17, which was much below the estimated ₹58,000 crore.

However, the Finance Ministry is upbeat about its revenue projections and believes that gains from demonetisation and curbs on black money will boost direct tax collections. The second tranche of advance tax payments will be made by September 15, giving a better picture of tax collections.

Similarly, while it has not made fresh estimates for collections under GST, the Finance Ministry is hopeful that these too will be robust.

Another source of comfort to the Exchequer is the expectation of hearty receipts from disinvestment of PSUs.

Though just ₹9,302.31 crore have been raised from disinvestment till now as against a target of ₹72,500 crore, the government expects higher proceeds in the second half of the fiscal, from stake sales in PSU insurers as well as exchange traded funds.

Analysts are also keeping a close eye on the Centre’s efforts at fiscal consolidation.

“The fiscal deficit target is a challenge particularly if the revenue collections do not meet up to expectations due to transitional issues in the roll out of GST,” said DK Srivastava, Chief Policy Advisor, EY India.

In its revised prognosis for the economy in 2017-18, CARE Ratings has projected a higher fiscal deficit at 3.4 per cent of the GDP as against its earlier expectation of 3.2 per cent.

“Unless other revenue increases or expenditure lowered, this slippage could result from lower non-tax revenue,” it had said, attributing the pressure to lower divided payment by RBI.

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