<b>Devendra Pant:</b> Tricky fiscal arithmetic

The Budget pegs 2017-18 fiscal and revenue deficit at 3.2 per cent and 1.9 per cent of GDP, respectively. At the core of the fiscal arithmetic is the assumption regarding nominal GDP growth of 11.75 per cent; assuming 7.0 per cent to 7.4 per cent real GDP growth, inflation as measured by the GDP deflator is expected to grow at 4.4-4.1 per cent. 

The Centre’s net tax revenues are expected to grow 12.7 per cent in 2017-18 (Revised Estimate, RE) (2016-17 Budget Estimate is 15.4 per cent), net tax revenue buoyancy marginally higher than 1. 

Aggregate net tax collection assumptions appear to be plausible. However, it appears to be slightly difficult at sectoral level. Personal income tax is expected to grow at 24.9 per cent in 2017-18. 

Customs duties are expected to increase 12.9 per cent in 2017-18. Union excise duties are expected to grow 5 per cent in 2017-18. Moreover, indirect taxes are likely to undergo a change after the implementation of the Goods and Services Tax. The disinvestment target of Rs72,500 crore in 2017-18, the highest so far, could derail the fiscal arithmetic.

Assumptions regarding expenditure appear to be optimistic. While revenue expenditure in 2017-18 is expected to grow 8.1 per cent, against 12.5 per cent in the previous year, non-interest revenue expenditure is budgeted to grow at 8 per cent in 2017-18 against 13.5 per cent in 2016-17.