NEW DELHI: Maintaining fiscal prudence is going to be a tightrope walk for the government, as lower-than-expected revenue collection may spoil its expenditure plan and fiscal goals, said Chief Economic Adviser KV Subramanian.
The CEA hinted at possible fiscal slippages on account of missing tax targets in the current as well as the next fiscal year.
“There may be a possible slippage in the fiscal deficit target. Revenue growth has not (yet) been as projected and there may be a shortfall.”
Up to November in FY 2019-20, the actual realisation of net tax revenue to the Centre has been Rs 7.51 lakh crore, which is 45.5 per cent of BE.
While this had been compensated by high non-tax revenue, the economic survey argues this is not sustainable in the long run. Even the revenue from GST remains muted and is likely to miss the target.
“The gap due to lower tax receipts could be to some extent compensated by higher mobilisation of non-tax revenue and disinvestment proceeds for 2019-20.
High growth in non-tax revenue may not be sustainable year after year.
The realisation from non-tax revenue and disinvestment being uncertain adds to the volatility in revenue projection,” the economic survey added, without suggesting any measures to fix the gap.
Subramanian also underlined the challenge in the next fiscal.
“The year 2020-21 is expected to pose challenges on the fiscal front. While on one hand, the outlook for global growth persists to be weak, with escalated trade tensions adding to the risk; on the other hand, the pace of recovery of growth will have implications for revenue collections,” he said, adding that revenue buoyancy of GST would be key to the resource position of both Central and state governments.
Given less headroom for fiscal manoeuvre, his immediate prescription for the Finance Minister to fix economy was to loosen the purse strings and relaxing fiscal targets.
“The focus of the government should lie on the rationalisation of non-committed revenue expenditure like subsidies. Further, to boost the domestic demand, which is crucial for the revival of growth, fiscal deficit target may have to be relaxed this year,” Subramanian added, in line with what major economists had been suggesting.