NEW DELHI: Maintaining fiscal prudence is going to be tight rope walk for the government, as lower than expected revenue collection may spoil the expenditure plan and fiscal goals of the government according to the chief economic adviser K Subramanian, who hints at possible fiscal slippage on account of missing tax targets in the current fiscal year and suggests a challenging path ahead.
'There may be a possible slippage in the fiscal deficit target. Revenue growth has not been as projected and there may be a shortfall,' The CEA said.
During the year 2019-20 (up to November), the actual realization of Net Tax Revenue to the Center 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 eco survey argues this is not sustainable in the long run. Even revenue from GST remain 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 realization 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.
And he 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,' the survey 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 rationalization 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 for the current year,' Subramanian added, in line with what major economists and India Inc had been suggesting to the government.
Subramanian, who was still bullish about the target to achieve $5 trillion economy by 20-25, had given a massive target of spending $1.4 lakh crore or (100 lakh crore) on infrastructure alone to achieve this target. Given the ambitious target, he did not comment on from where the investment will come from.