HYDERABAD: Government may be cheering the latest GST collections, which crossed the Rs 1 lakh crore mark, but concerns of fiscal deficit breach continue to persist. Reason: The monthly GST revenue run-rate remains pedestrian, while other revenue sources including disinvestment proceeds and direct tax collections appear subdued.
“Whether a fiscal slippage emerges relative to budgeted level for FY19 would depend on the extent to which a host of revenue and expenditure risks crystallise. Such risks include the likelihood of meeting the targets for the GST, dividends and profits, disinvestment, the adequacy of outlays for revised minimum support prices, the National Health Protection Scheme, fuel and other subsidies, and bank recapitalisation,” Aditi Nayar of ICRA said, noting that October’s GST collections were a tad lower than April collections. Experts say it’s unlikely that the October momentum can be sustained for the rest of the fiscal.
According to Kotak Securities, the required run-rate for the rest of FY19 is roughly Rs 1.24 lakh crore (currently, the seven-month FY19 run-rate is about Rs 90,000 crore) and that the government can achieve the GST budget estimate if the month-on-month growth in CGST, SGST and IGST can be sustained for next five months.
“However, this will be extremely optimistic scenario. In a more realistic scenario of 1.5 per cent MoM increase during the rest of FY19, with higher IGST allocation to the Centre and distribution of unallocated compensation cess equally between Center and states, the Center’s shortfall would likely be about Rs 50,000-60,000 crore,” it noted.
The government is attempting to meet the fiscal deficit target of 3.3 per cent of GDP, and has even cut down on its annual borrowings last month by Rs 20,000 crore. Still, the bleak revenue generation implies that the treasury may have to claw back on proposed capital expenditure, considering an unavoidable rise in revenue expenditure on account of higher food and fuel bills.
“However, gross borrowing through dated securities may not necessarily increase unless divestments disappoint too,” Kotak noted.