Fiscal Developments

The Central Government finances went through considerable degree of consolidation in the last three years, aided by buoyant tax revenues that largely sprang from additional revenue measures and subsidy reduction related to reduced petroleum prices. The quality
of spending improved with a gradual tilt towards capital expenditure. The fiscal outcome in 2016-17 was marked by robust growth in tax revenue stemming largely from excise taxes on petroleum– and consolidation of non-salary/pension revenue expenditure and of borrowing. The Union Budget for 2017-18 opted for a gradual rather than the sharp consolidation path recommended by the FRBM Review Committee, prudently balancing the requirements of a cyclically weakening economy and the imperative of maintaining credibility, especially in the wake of disruptions to state government finances, reflecting
their absorption of the DISCOM liabilities under the UDAY programme. The Centre
is watchful about its finances in the first year of GST. State finances now face stresses from potential farm loan waivers. And with public sector enterprises tending to consolidate, public investment growth in 2017-18 may moderate.

Source: Economic Survey 2017 Vol II

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