Economists warn that revenue deficit may breach target
New Delhi: Will the Exchequer’s switch to a new classification of expenditure from 2017-18 help lower the revenue deficit and improve the quality of spending?
The Finance Ministry believes that shift in classification to revenue and capital expenditure from April 1, departing from the current distinction of Plan and Non-Plan spending, will help it direct expenditure towards productive purposes.
It is also hopeful that measures taken to encourage capital expenditure by Ministries will help balance the skewed spending pattern from 2017-18.
Fiscal consolidation
The report of the NK Singh Committee on the future fiscal consolidation roadmap is also expected to give further pointers on how to tackle the deficit while improving the quality of spending.
Analysts, however, are cautious and point to the high revenue deficit, which is in danger of breaching its budgeted target in 2016-17.
“The Centre is likely to meet the fiscal deficit target of 3.5 per cent, but going by the Central government accounts till November, I think it will miss the revenue deficit target of 2.3 per cent of GDP by a reasonable margin in 2016-17,” said DK Srivastava, chief policy advisor, EY (India).
According to data with the Controller General of Accounts, the revenue deficit between April and November 2016 touched a two-year high of ?3.48 lakh crore or 98.4 per cent of the Budget Estimate.
The Fiscal Responsibility and Budget Management Act, 2003 aims to lower the revenue deficit to 2 per cent by the next fiscal year and, accordingly, the Centre plans to lower its revenue deficit to 1.8 per cent of GDP in 2017-18 and further to 1.3 per cent in 2018-19.
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