India needs to urgently raise its tax base to meet the fiscal deficit target without curbing essential expenditure, says a SBI report.
The country's gross fiscal deficit as percentage of GDP, started shooting up after the 2008 financial crisis, said the report -- 'India's Public Finance Trends'.
However, with economic recovery gaining pace, the government embarked on the path of fiscal consolidation and has brought down its fiscal deficit to 3.5 per cent of GDP in 2016-17.
"The states' fiscal deficit, however, has increased. To reach the combined target of 6 per cent fiscal deficit for the Centre and states an alignment of the policies of the Centre and states is required," it said.
The report further said: "However, in the ultimate analysis, in a country where close to only 4 per cent of the population pays taxes, it is urgently needed that the tax base be increased so that austerity measures are not required to remain on the path of fiscal consolidation."
Apart from fiscal consolidation, India has also ramped up its fiscal infrastructure in a big way, it said, adding that tax payments and refunds are now mostly online.
On the revenue side, major tax components were growing healthily before 2007-08, it said.
"After the crisis, the collections were subdued. They have revived, but are still volatile. Disinvestment receipts have picked up pace after the 2008 crisis," it said.
The SBI report said that for 2017-18, the government is targeting Rs 72,500 crore worth of disinvestment, an increase of a whopping 59 per cent from the last fiscal.
On the expenditure side, to maintain the fiscal balance while promoting growth, the government is focusing on curtailing revenue expenditure, while maintaining the level of capital expenditure, it added.
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