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%
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.
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