Skip to main content

Tax-GDP ratio may rise to 11.9% due to GST, closer scrutiny: Government

By

The government expects the goods and services tax (GST) and increased surveillance to boost tax revenues over the next two years, taking India’s tax-to-GDP ratio close to 12% by FY 20. 
The higher revenues are projected to push up capital spend of the government, bring down fiscal deficit to sustainable 3% of GDP and lower the revenue deficit to 1.4% of GDP by FY 20. The medium-term expenditure framework released by the government on Thursday shows tax-to-GDP ratio rising 30 basis points each in FY19 and FY20 to 11.6% and 11.9% respectively. 
The government expects any shocks to tax collections due to the introduction of GST to be absorbed in the current fiscal. It said “going forward in the years 2018-19 and 2019-20, the gains from expansion of the tax base due to the introduction of GST and the increased surveillance post demonetisation will ensure that tax-GDP ratio will increase by 30 basis points in each of the above FYs in question”. 
Higher taxes will allow the government to spend more on creation of capital assets. The share of capital spending in total spending of Rs 26 lakh crore in FY20 is set to rise to 15%, compared with 14.4% in FY18 in a total spending of Rs 23.4 lakh crore. 
Ahead of the next general elections, welfare spending is also set to get a boost from the surge in tax revenues with spending on centrally sponsored schemes set to rise 23.6% in FY 20 to Rs 5.67 lakh crore from Rs 4.59 lakh crore in FY18. Education and healthcare are the gainers. Pradhan Mantri A was Yojna will also get bigger support towards the housing for all initiative. 
LOWER RATES 
The declining interest rates have helped the government save on interest and the stable government finances are expected to keep interest rates low over the next two years. The government’s FY 17 interest cost was Rs 12,000 crore lower than that budgeted, which the government said indicated the economy is moving towards a more benign interest rate cycle. 
“If this trend continues, it will have an impact not only on the government expenditure but will also have a salutary impact on the investment decisions of economic agents in the country,” the statement said. MTEF Projections for nominal interest payments for 2018-19 and 2019-20 have been pegged at Rs 564,400 crore and Rs 615,000 crore. These show a steady increase in absolute terms but have been projected to fall if calculated as a percentage of gross tax revenue and revenue receipts. 
Interest payments are projected to decline as a proportion of gross tax revenue and revenue receipts from budgeted 27.4% and 34.5% in FY18 to 25.7% and 33.2% in 2018-19 and 24.4% and 32.3% in 2019-20. 
This is partly due to the robust tax revenue growth. “Coupled with the targeted FD of 3.0% of GDP in 2018-19 and 2019-20, it may safely be assumed that there will not be any upward pressure on interest rates,” the statement said. 
The Economic Times, New Delhi, 11th August 2017

Comments

Post a Comment

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

By
  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...
Post a Comment
Read more

External spillovers likely to hit India's financial system: RBI report

By
  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...
Post a Comment
Read more

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

By
  New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...
Post a Comment
Read more