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Govt can meet fiscal deficit target despite additional spending of Rs 37,200 crore

27 Aug 2015 Evaluate

Domestic ratings agency India Ratings in its report has said that the government can spend an additional Rs 37,200 crore more this fiscal year in infra investments or bank recapitalisation and still not miss the 3.9 percent fiscal deficit target. The estimation of the rating agency showed an additional fiscal space of Rs 37,160 crore or 27 bps of additional GDP for the government in FY16 on account of both lower oil subsidy and additional revenue generated under some budget heads. 

Further, the report attributed the surplus of the higher indirect tax collections rose about 39% till July and a massive decline in crude prices. Falling of the crude oil prices has lead to total savings of Rs 18,750 crore in oil subsidies alone. Similarly, till date the government has been failing to meet its direct tax mop up. The net direct tax collections grew a modest 6.44% against a target of 18% in the June quarter, raising doubts over the ambitious Rs 6.7-trillion target set for the current fiscal year.  Further, the report added that “If a part of the surplus, say Rs 10,000 crore is allocated for the recapitalization of public sector banks, then the multiplier effect of the credit will significantly support growth and strengthen bank balance sheet”.

However, the report warned of some slippages as well with the most of it coming from disinvestment front. Against the target of Rs 69,500 crore so far it could collect only around Rs 13,000 crore. While considering the market condition said that the target is more likely to be missed than met.

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