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RBI warns of fiscal slippage, inflation

Press Trust of India  |  Mumbai 

Sounding a note of caution, the Reserve today said reduction in rates, partial roll- back of duties on petroleum products and farm loan waivers by some states may lead to "fiscal slippage" fuelling

Releasing the Fifth Bi-Monthly Monetary Policy statement for 2017-18, it also raised the forecast marginally to 4.3-4.7 per cent for the second half of the fiscal from earlier estimate of 4.2-4.6 per cent.

"...implementation of farm loan waivers by select states, partial roll back of excise duty and VAT in the case of petroleum products, and decrease in on account of reduction in rates for several goods and services may result in fiscal slippage with attendant implications for inflation," it said.

The Goods and Services (GST) Council had last month cut the rate on 178 items from 28 per cent to 18 per cent, leaving only 50 items in the highest slab.

It had reduced the rate on 27 items of common use in October as well.

collections were Rs 83,346 crore in October, down from over Rs 92,000 crore in the previous month.

As per a RBI paper, released in September, farm loan waiver amounting to Rs 88,000 crore likely to be released in 2017-18 by seven states, including Uttar Pradesh and Maharashtra, may push on permanent basis by 0.2 per cent.

In October, the central government had cut excise duty on petrol as well as diesel with a view to moderating the rise in fuel prices witnessed for the previous three months. The duty reduction will lead to a Rs 13,000 crore loss of to the government in the current fiscal.

Following the excise cut, several states too had reduced VAT on the fuel.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, December 06 2017. 16:45 IST