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FY15 mid-year economic analysis

Arup Roychoudhury 

FY15 mid-year economic analysis

Finance Minister Arun Jaitley will table the mid-year economic analysis for financial year 2015-16 on December 18. The review, being prepared by Chief Economic Advisor Arvind Subramanian and his team, will examine the trends in receipts and expenditure for the first two quarters of the year in relation to the Budget and will provide a statement explaining deviations in meeting the government's fiscal obligations. A look at the previous financial year's mid-year review


The mid-year economic review of 2014-15 projected a substantial shortfall of Rs 1.05 lakh crore in tax revenue projections for that year. The analysis gave a number of reasons for the shortfall. It conceded the 2014-15 budgeted revenue estimates were too optimistic and said the nominal GDP growth would be lower than earlier projections. The eventual shortfall was Rs 1.13 lakh crore

The mid-year review was the first instance when the need for the government to boost public spending in infrastructure was spelt out. "Consideration should be given to address the neglect of public investment in the recent past and also review medium-term fiscal policy to find the fiscal space for it," Subramanian had said in the analysis. At a time of stretched private-sector balance sheets, it became a stated commitment for the government. For April-October 2015, the Centre's capital expenditure was Rs 1.43 lakh crore, the highest-ever for the same period in any year (THROUGH THE LENS)

The analysis also said that the expenditure bill for 2014-15 was burdened with a 'legacy of carried-over expenditures. It said that the then fiscal deficit target of 4.1 per cent of GDP represented a 'strongly pro-cyclical fiscal policy-consolidation when growth was below potential - which is ambitious at the best of times..."

The analysis also spoke about the need for expenditure cuts to offset the revenue shortfall. "When you are facing a target, you have to use all measures possible to achieve it. And some form and combination of expenditure cuts will be used," the CEA had said. The eventual cuts in 2014-15 total expenditure were similar to the tax revenue shortfall, at about Rs 1.14 lakh crore

The analysis praised the monetary policy stance of RBI Governor Raghuram Rajan, saying that under him, India had regained credibility on the monetary policy front. "For a long time, the Indian economy has been drifting without a credible monetary anchor. Since 2013, however, this has been laudably reversed," said Subramanian

The review had said the proposed GST and the Direct Benefit Transfer programme were 'game-changing reforms', which over the long run could replace many of the govt interventions which affect producers and consumers. "We should think about reforms not just at the Centre but also at the state level. The vision we should be thinking about is India as a model of cooperative and competitive federalism"

First Published: Fri, December 18 2015. 00:40 IST