Budget maintains fiscal prudence sans spending cuts: Jaitley

Finance Minister Arun Jaitley

New Delhi, Feb 3 – Constrained by the need for fiscal prudence, Budget 2017-18 continues on the path of fiscal consolidation without compromising on India’s public expenditure, Finance Minister Arun Jaitley said on Friday.

“In view of the priority to increase government spending so as to help spur growth, an important constraint on our budget preparation was the need for fiscal prudence,” Jaitley said at an interaction here with representatives of industry chambers.

“In two years and eight months, we have brought the fiscal deficit down from 4.6 per cent (of GDP) to 3.2 per cent,” he said.

“In this budget, I have maintained the path of fiscal consolidation without compromising on expenditure. No tax refunds have been held, but I have not cut any expenditure at the same time,” he added.

He pointed out that in this regard, both for the current and last fiscals, the revised estimates of expenditure have come in higher than the budget estimates.

In a move to support higher government spending in the coming fiscal, Jaitley has pegged the fiscal deficit target at 3.2 per cent of the country’s GDP in his Budget 2017-18 presented in Parliament on Wednesday.

The figure is higher than the earlier targeted figure of 3 per cent of the GDP for 2017-18. The fiscal deficit target for the current fiscal is at 3.5 per cent, while for 2018-19 it has been set at 3 per cent.

In this connection, Jaitley said his optimism on containing the fiscal deficit was based on 17 per cent growth in tax revenues seen in each of the last two years.

The Finance Minister has provided for a total government expenditure of Rs 21,41,000 crore in the forthcoming fiscal.

With the government under pressure from global rating agencies on this count, India’s fiscal deficit in the April-November period of the current fiscal touched Rs 7.96 lakh crore — or 85.8 per cent of Budget estimates for 2016-17 — as against 87 per cent of Budget estimates in the same period of the previous year.

According to the Controller General of Accounts data, the deficit, or the gap between expenditure and revenue for the entire current fiscal, has been pegged at Rs 5.34 lakh crore, as compared to the deficit of Rs 5.35 lakh crore in the last fiscal as per revised estimates of 2015-16.

The exchequer’s tax revenue during the period in question yielded Rs 6.21 lakh crore, or 58.9 per cent of the estimates, while total receipts from revenue and non-debt capital during the fiscal’s first eight months were Rs 7.96 lakh crore, or 57.8 per cent of the estimates for the current year.

Total expenditure during the April-November period was Rs 12.9 lakh crore, or 65 per cent of the entire fiscal’s estimate. Of the total expenditure, money spent on plan was over Rs 3.64 lakh crore, while non-plan expenditure came to more than Rs 9.22 lakh crore.

The revenue deficit during April-November was over Rs 3.48 lakh crore, or 98.4 per cent, of the estimates.

Meanwhile, US rating agency Moody’s said on Friday that India’s Budget 2017-18 emphasises fiscal prudence, continued gradual fiscal consolidation and balanced growth, noting, however, the challenges in meeting its revenue collection target.

“Moody’s expects the government to achieve its targets, based on achievable budget assumptions and demonstrated commitment to fiscal prudence, but also notes that spending commitments are significant and structural hurdles to rapid increases in revenue collection are apparent,” Moody’s Investors Service said in a report.