Tax-GDP Ra­tio May Rise to 11.9% Due to GST, Closer Scru­tiny: Govt

Higher tax rev­enues to push up govt’s cap­i­tal spend, cut fis­cal deficit to 3% of GDP & lower rev­enue deficit to 1.4%

The Economic Times - - Economy: Macro, Micro & More Looking Ahead: 3-year - Our Bureau

New Delhi: The gov­ern­ment ex­pects the goods and ser­vices tax (GST) and in­creased sur­veil­lance to boost tax rev­enues over the next two years, tak­ing In­dia’s tax-toGDP ra­tio close to 12% by FY20.

The higher rev­enues are pro­jected to push up cap­i­tal spend of the gov­ern­ment, bring down fis­cal deficit to sus­tain­able 3% of GDP and lower the rev­enue deficit to1.4% of GDP by FY20. The medium-term ex­pen­di­ture frame­work re­leased by the go-

WEL­FARE BUD­GET UP

spend­ing of ₹ 23.4 lakh crore.

Ahead of the next gen­eral elec­tions, wel­fare spend­ing is also set to get a boost from the surge in tax rev­enues with spend­ing on cen­trally spon­sored schemes set to rise 23.6% in FY20 to ₹ 5.67 lakh crore from ₹ 4.59 lakh crore in FY18. Ed­u­ca­tion and health­care are the gain­ers. Prad­han Mantri Awas Yo­jna will also get big­ger sup­port to­wards the hous­ing for all ini­tia­tive.

LOWER RATES

The de­clin­ing in­ter­est rates have helped the gov­ern­ment save on in­ter­est and the sta­ble gov­ern­ment fi­nances are ex­pected to keep in­ter­est rates low over the next two years.The gov­ern­ment’s FY17 in­ter­est cost was ₹ 12,000 crore lower than that bud­geted, which the gov­ern­ment said in­di­cated the econ­omy is mov­ing to­wards a more be­nign in­ter­est rate cy­cle.

“If this trend con­tin­ues, it will have an im­pact not only on the gov­ern­ment ex­pen­di­ture but will also have a salu­tary im­pact on the in­vest­ment de­ci­sions of eco­nomic agents in the coun­try,” the state­ment said. MTEF Pro­jec­tions for nom­i­nal in­ter­est pay­ments for 2018-19 and 2019-20 have been pegged at ₹ 564,400 crore and ₹ 615,000 crore. These show a steady in­crease in ab­so­lute terms but have been pro­jected to fall if cal­cu­lated as a per­cent­age of gross tax rev­enue and rev­enue re­ceipts.

In­ter­est pay­ments are pro­jected to de­cline as a pro­por­tion of gross tax rev­enue and rev­enue re­ceipts from bud­geted 27.4% and 34.5% in FY18 to 25.7% and 33.2% in 2018-19 and 24.4% and 32.3% in 2019-20.

This is partly due to the ro­bust tax rev­enue growth. “Cou­pled with the tar­geted FD of 3.0% of GDP in 2018-19 and 2019-20, it may safely be as­sumed that there will not be any up­ward pres­sure on in­ter­est rates,” the state­ment said. 2. To­tal Spend­ing 3. Fis­cal Deficit Cap­i­tal Spend­ing Rev­enue Deficit Ef­fec­tive Rev. Deficit 4. 2300 16248 9000 4089 48000 4814 3361 6043 23000 21189 2707 19877 11200 4817 60000 10000 4824 13000 23000 36000

1. GST BO­NANZA… …TO AL­LOW HIGHER CAP­I­TAL SPEND­ING …AND HELP RE­DUCE DEFICITS (% OF GDP) MORE FUNDS FOR KEY SCHEMES

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