The Union Minister for Finance and Corporate Affairs, Shri Arun Jaitley tabled the Economic Survey 2017-18 in Parliament today.
Based on the firm footing provided by the discernible improvements in most fiscal indicators such as revenue buoyancy, expenditure quality, tax devolution and deficits, the Government, in partnership with the States, ushered in the long-awaited GST era with effect from July,2017. The GST was unveiled after comprehensive preparations, calculations and multi-stage consultations, yet the sheer magnitude of change meant that it needed to be carefully managed. The Government is navigating the change and challenges, including the possibility that a substantial portion of the last-month GST collections may spill over to the next year, the Survey says.
The data on Central Government finances available till November 2017 from the Controller General of Accounts (CGA) suggests that during the first eight months of the current year 2017-18 the Gross Tax Collections are reasonably on track; and the robust progress in disinvestment compensates to a great extent for the sluggish pace in non-tax revenue. The growth in direct tax collections of the Centre has kept pace with the previous year and is expected to meet targets, with a growth of 13.7 per cent while indirect taxes grew by 18.3 per cent during April-November 2017.
The eventual outcome in indirect taxes during this year will depend on the final settlement of GST accounts between the Centre and the States and the likelihood that only taxes for eleven months (excluding IGST on imports) will be realized. The States' share in taxes grew by 25.2 per cent during April-November 2017, much higher than the growth in net tax revenue (to Centre) at 12.6 per cent and of gross tax revenue at 16.5 per cent.
As an information repository, the Goods and Services Tax (GST) provides a radical change and a new insight into the understanding of the Indian economy. Preliminary analysis of this information yields the following feast of findings. There has been a fifty percent increase in the number of indirect taxpayers; and a large increase in voluntary registrations, especially by small enterprises that buy from large enterprises and want to avail themselves the input tax credits.
The distribution of the GST base among the states is closely linked to the size of their economies, allaying fears of major producing states that the shift to the new system would undermine their tax collections. Data on the international exports of states (the first in India's history) suggests a strong correlation between export performance and states' standard of living. India's exports are unusual in that the largest firms account for a much smaller share of exports than in other comparable countries. India's internal trade is about 60 percent of GDP, even greater than estimated in last year's Survey and comparing very favorably with other large countries. India's formal sector, especially formal non-farm payroll, is substantially greater than currently believed. Formality defined in terms of social security provision yields an estimate of formal sector payroll of about 31 percent of the non-agricultural work force; formality defined in terms of being part of the GST net suggests a formal sector payroll share of 53 percent.
The advancing of the budget cycle and processes by almost a month gave considerable leeway to the spending agencies to plan in advance and start implementation early in the financial year, leading to a robust pace of progress of Central expenditure.
Sound Public financial management has been one of the pillars of India's macro economic stability in the last three years. In accordance with this, the Fiscal Deficit, Revenue Deficit as well as the Primary Deficit has been declining for the past 3 years.
FISCAL INDICATORS AS PERCENTAGE OF GDP
The early pick-up in expenditure coupled with front-loading of some expenditure and increased interest outgo exerted pressure on fiscal deficit which expanded to 112 per cent of budget estimates by November 2017. A good part of this growth is likely to normalize as the year progresses.
If indications and patterns till November are to hold, then the States taken together may be able to meet their targeted level of fiscal deficit in 2017-18.
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