Amid depreciating rupee and high crude prices, the government is determined to keep fiscal deficit within the budgeted level of 3.3% of Gross Domestic Product (GDP) as the country cannot afford to have a twin deficit problem. A depreciating rupee and high crude import bill will definitely put pressure on the country's current account deficit (CAD), and a fiscal slippage at this juncture will lead to a twin deficit.
Further, the dependence on oil as a source of tax revenue has to be brought down and this can only happen when the share of non-oil tax to GDP goes up. Besides, income tax revenues are moving in right direction, Goods and Services Tax (GST) mop up is also recovering and if government keeps expenditure within control, then it will definitely maintain the fiscal deficit situation.
Additionally, the government's finances have shown improvement in July 2018 with fiscal deficit at 86.5% of the Budget Estimate (BE), mainly on account of higher revenue collection. The deficit was at 92.4% of BE at July-end of the last financial year. The CAD, which is the difference between inflow and outflow of foreign exchange, rose to $18 billion or 2.4% of GDP in April-June quarter on account widening trade deficit.
